Hiring right has emerged as a key driver to reap returns on human capital investments. Talent quality has a direct effect on performance indicators (sales, customer satisfaction, organizational culture, theft etc.). Moreover, there is also an impact on retention, which indirectly helps to reduce hiring costs.
However, organizations often struggle to measure the impact of quality hires. Although data on performance and attrition are easily available, talent acquisition professionals often ignore the linkage of talent quality to business outcomes. Even when they undertake such an initiative, the trends and insights are often lost in translation due to incorrect analysis techniques.
For analyzing linkage of talent quality to business outcomes, it is imperative that:
- The same selection platform is used consistently for the specific level.
- Assessment scores and performance measures are available for a majority of individuals.
- The selection system is valid and reliable: it consistently distinguishes between a high quality and low quality candidate.
We applied this analysis process on a cross section of organizations. As expected, talent quality had an impact on a variety of business outcomes:
- Increase in revenue: On linking employee’s assessment score to sales per hour data, a large retail organization noticed that employees who had higher scores in the assessment also had higher sales per hour. Though the difference between high performers and marginal performers was initially minor, it steadily increased to a multimillion dollar differential within a year of employment.
- Increase in customer satisfaction: In retail organizations, a positive correlation has consistently been drawn between high scoring employees and customer satisfaction scores. High scoring employees were rated as more efficient and friendly as compared to low scorers.
- Cascade effect on employee engagement: In a quick service restaurant, team members of high scoring managers were more likely to rate the workplace as a good place to work than individuals working for low scoring managers. These high scorers were also more likely to have teams that stayed with the organization for more than 6 months.
- Increase in retention: In an independent study conducted, low scoring employees in the assessment were 3 to 10 times more likely to report an intention to leave the organization within 6 months, unlike high scoring employees.
As demonstrated, there are strong returns realized by investing in selecting higher-quality talent. These returns can be quantified with relative ease with the right data. Selecting the right employee, however, is only one of many ways to drive greater results through talent.
A strong pipeline of applicants is a prerequisite for being able to select the best talent. Candidate communications, pay, and benefits are important to ensuring an attractive employee value proposition. In addition, those candidates who are hired will need to be trained, directed with proper goals, given performance feedback, and coached to higher levels of performance. These and other talent strategies, when aligned with the organization’s business strategy, will ensure results that are equal to or even better than those examples presented here.