Separations of low-tenure employees as a percentage of total hires during the reporting period.
Separations . Short tenure / External hires * 100
New Hire Failure Factor represents one perspective on turnover levels within new external hire populations. As an alternative to viewing separation rates within various tenure levels, New Hire Failure Factor instead compares ‘short tenure’ separations to the number of external hires made within the period.
The turnover of a very short tenured employee may be due to any number of factors, such as poor organisational fit, poor understanding of the position, poor onboarding or inadequate qualifications to perform the job duties.
While some of these factors manifest themselves post-hire, many of these factors are seen as at least somewhat controllable within the recruiting process.
For example, while it may be the employee’s own misunderstanding of the position that caused a separation, an organisation might determine that the recruiting process did not properly describe the position for the applicant. In this way, New Hire Failure Factor can be used as an indication of recruiting effectiveness.
A similar, commonly used metric is Separation Rate- < 1 Year , and many variations on this metric are possible. While separation rates compare short tenure separations to average headcount, New Hire Failure Factor compares them to hires made during the period.
Organisations may calculate tenure using a hire date, though many calculate tenure using an adjusted hire date that may include tenure from previous periods of employment with the organisation.
For this measure, however, tenure of current employment is preferable to adjusted service tenure. Organisations typically source hire and separation data from job tables within an HRIS.
This measure requires the organisation to define ‘short tenure’. Employers implementing this and other measures may think of short tenure as a tenure level at which employee contributions have not exceeded the organisation’s investment in hiring and training.
Most organisations define short tenure as a period of three to 12 months’ duration, depending on context or the level of the job. Other permutations may be used based on the organisation’s own context.
Organisations may analyse New Hire Failure Factor by a number of subgroups and characteristics
to identify high- or low-result pockets within the organisation and further investigate recruiting and onboarding process gaps. Some dimensions used for such analysis include age, occupation, job family, job function, organisational unit, employment level, ethnic background and gender.
One important limitation of New Hire Failure Factor is that, from time period to time period, the separations considered in this measure may not be part of the same group of hires considered by this measure. In other words, the numerator and denominator of this measure are not perfectly temporally matched.
There is also no easy way to perfectly differentiate failures in the recruitment process from failures in onboarding or other factors controlled more by the management of the organisational unit rather than the recruiting process. Finally, this measure does not, without further analysis, distinguish among the various reasons employees separate.
Because New Hire Failure Factor represents organisational costs of turnover and, to some extent, a failure in the recruiting process, most organisations will target moving New Hire Failure Factor results toward the 25th percentile or lower within a relevant benchmark group.
Certainly, organisations might have higher targets if they expect temporary fluctuations (e.g. reorganisations) or if they are working from a very high result gradually to a lower level over a period of years.