Why the Best CEOs and Leaders Measure Quality of Hire

Posted on August 11, 2022

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Quality of Hire

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Early at a startup, founders decide whether to build from the top-down or bottom-up. The most successful startups are top-down—a leader has a vision of what the world needs, then creates it, markets it and sells it. I advise founders to think of themselves as movie producers. Their job is to write a script, cast actors, cut a trailer, and sell tickets. Great movies aren’t created by committee, and neither are great companies.

Hiring—casting your roles—is the most important part of company building. Just like in Hollywood, the choice of one or two leads can mean the difference between a blockbuster and a flop. Consider Meryl Streep in The Devil Wears Prada or Clint Eastwood in In the Line of Fire. I can’t imagine anyone but them in those roles.

Building a startup requires starting with a vision and thinking: “Who do I need? Who is the right actor or actress, supporting actor and actress?” If I were building a rocket company, I would need very different people than I have at OpenStore today. To hire the right people, first identify the key risks to your company, then find people who have an unfair advantage in tackling those risks.

Building a critical density of talent becomes easier with experience. Surprisingly, besides painful trial and error, there are few solutions that help teams raise hiring quality. An effective framework to apply here is paired metrics, as discussed in my 2011 presentation on “How to Be An Effective Executive.” You almost always want a pairing indicator to prevent your team from overly optimizing to a single goal. In the case of hiring, the most effective paired indicators are Time to Hire and Quality of Hire (QoH).

QoH means focusing on outcomes, and it’s a critical metric that CEOs should insist on tracking to ensure the right people are in the right roles. Just as a stellar cast can transform a mediocre script into a great movie, the right people are essential for business success. Businesses need to put just as much effort into hiring as they put into product, and you can’t improve what you can’t measure. While I’ve encouraged teams to measure QoH since my 2011 presentation, historically there has been no easy way to do so. Now, more than a decade later, I am easily tracking QoH at OpenStore with Searchlight.

At OpenStore, we set an aggressive goal to add 150 new employees in 2022 and we’re using Searchlight to deliver hiring quality without sacrificing speed. Searchlight quantifies hiring outcomes using a formula that can predict first-year performance and retention as early as a hire’s first 60 days on the job. This data allows us to quickly understand what makes our high-performers unique, intervene if needed to prevent turnover, boost productivity by adding more high-performers to teams and much more. It’s created a feedback loop for my team that helps them hire smarter and faster. 

The need to be disciplined and prudent when hiring is even more critical given market conditions. I’m on the board of a successful company that has more than $500M in the bank: even they recently took a hard look at their H2 hiring goals and reduced headcount plans. Every company should be doing this right now. The need to be disciplined and prudent when hiring is even more critical given market conditions and CEOs must look for ways to be more talent efficient and talent dense. Searchlight is the most effective tool I’ve found for measuring QoH and driving transformative business results.  

Keith Rabois

Keith Rabois is the CEO & Founder of OpenStore and the General Partner of Founders Fund

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