Hiring: What You Don’t Know Hurts!

When I was a kid, I watched adults get their teeth pulled and replaced by dentures. My kid-brain thought it was normal. When I grew up, my adult brain learned it wasn’t necessary to give up on your teeth. The same goes for most organizations. People routinely think reviewing resumes and conducting casual interviews are normal. After all, that’s the way it has always been done. But like poor dental hygiene, resumes and casual interviews lead to toothless results.

I was lucky enough to watch startup organizations identify critical job competencies, validate multiple testing methods, thoroughly evaluate each candidate, and hire only people who could demonstrate they had job skills. Needless to say, the results were awesome! Profitable in half the time; salesforces broke all previous records; turnover dropped significantly; and pre-employment training time shortened. Was it a miracle? No. Lke flossing and brushing, it was the product of best-hiring practices.

Did I invent best practices? No. Did I receive them from aliens while in an altered state of conscientiousness? No, the government published them in the late 1970s, as a result of the Civil Rights Act. It hired a panel of experts to develop a uniform set of hiring and placement practices governmental organizations could follow. It called it the 1978 Uniform Guidelines on Employee Selection. But it’s 30 years later and the majority of hiring folks I meet still have no idea the Guidelines exist or have anything to do with their job. It’s as if they live in Lake Woebegon where all the men are strong, the women are good looking, and all the kids are above average. Why do a majority of people involved in hiring refuse to get with the program? I’ve come across a few reasons.

Quantity, not Quality

HR and recruiters are primarily concerned with managing transactions, or as one person said, “Filling seats with bums.” They know and understand work orders, placing ads, screening, and getting to know candidates; but, they pass off to the hiring manager responsibility for determining applicant qualifications. Wrong. Not only does this diffusion of responsibility results in an almost complete lack of quality control of incoming employees, it causes a major rift between HR and line management.

Best Practices Are Considered Optional

Less-bright people seem to think the ‘Guidelines’ are something that either does not apply to them, or are only used in EEOC or OFCCP challenges. Some people have commented to me with a straight face, “The Guidelines are only optional; we do not have to follow them” or “Very few organizations are sued.” Those ideas come from complete ignorance of what the Guidelines can do for organizations. Who, for example, can argue against thoroughly understanding critical job requirements, basing assessments on job requirements and business necessity, using only valid and reliable tests, and constantly monitoring adverse impact? Yep. The Guidelines are only optional if you don’t want to understand job requirements, ignore job requirements and business necessity, use crappy tests, and ignore adverse impact. That’s some option!

Non-Feedback Feedback

Follow up on hiring quality is also a serious shortcoming. Time and again I have heard recruiters claim they should do more follow-up on the quality of candidates. This is a problem. Managers are reluctant to publicly admit they hired the wrong person (i.e., admitting you wasted tens of thousands on a bad hiring decision is not exactly a career builder). External recruiters tell me they measure success one guarantee period at a time. (When will they learn longevity does not always equal productivity?) And, internal recruiters tend to rely on smile sheets (yep, another waste of time). Legitimate follow-up is impossible unless you compare pre-hire data with post-hire data. Don’t get hung up on words; an assessment is any method used to evaluate job candidates.

Fear of the Unknown

HR generally is risk averse, distrusts things they do not understand, has a limited budget, a limited staff, and its professional association seems to take the importance of good hiring practices for granted (an attitude I think will lead to its eventual demise). I knew one HR manager who refused to follow best practices because it would make her job harder. Gee, I wonder how management would feel about that attitude? Replace her with a fully competent HR manager, maybe? In addition, I’ve noticed that HR is quicker to adopt web-screening systems (i.e., manage applicant flow) than improve new employee quality. Good for them. Bad for the organization.

Article Continues Below

Good Luck Is Often the Product of Hard Work

Best-practices are hard. They require giving up comfortable alternatives. They require an admission that you can’t “break-into” professional recruiting any more than you can “break-into” medicine, law, or accounting. Hiring professionals must learn the technology of the profession. Best practices also make the recruiting job harder. Hiring is a probability game of identification, evaluation, and follow up. It takes a concentrated effort. Personal anecdotes of one-off results won’t cut it. And, sorry to disappoint, but reading articles might raise your awareness; however, it’s no substitute for going back to school, investing long years of practice, or having the bucks to hire an expert.

Unconscious Decision-Making

Human decision making is fundamentally flawed. People trust more what they know than what they don’t. They tend to remember when they were right, and forget when they were wrong. The need to become “comfortable” with a candidate is rooted in an evolutionary need to quickly assess personal danger, not evaluate candidate competencies. More often than not, when people base hiring decisions on personality, as opposed to skills, they make hiring mistakes. If you want to see how powerful unconscious factors are, read the comments associated with other ERE articles insisting “fit” and personality are the most important hiring factor.

Bad Practices Are Costly

The consequences of following bad practices include promotion pools that have too few skilled people; sending people to workshops to “fix” them; unnecessary EEOC and OFCCP exposure; bloated workforces that hemorrhage 20-50% annual payroll each year; weak competitive bench strength; and organization culture “drift,” to name a few.

There are no shortcuts. There is no easy solution. There are no magic questions. Any organization that wants to take command of its future must first take command of its workforce. If you find that getting managers on your side is a problem, invite them to a meeting or conference call with someone who knows and understands best practices. Let the Geek do the talking for you. If the call goes badly, you can both commiserate. If the call goes well, you can take all the credit.

Topics

5 Comments on “Hiring: What You Don’t Know Hurts!

  1. I think a lot of people respond to how rigorous hiring should be with disbelief: How hard can it be? I think you’re spot on with the fear factor–when they get a whiff of how much effort should be devoted, they shy away. The field also suffers from an association with “soft” HR rather than “hard” I/O psychology.

    These are some of my favorite reactions which pretty much match the factors you identify:

    “Uniform Guidelines”? Aren’t those really old (and boring)?

    Hiring isn’t hard, I’ve done it plenty of times in the past.

    People should want this job, why are we spending all this time on recruitment?

    (Related) Why are we putting candidates through all these hoops? We need to hire fast.

    Without metrics that measure the success of a hiring process, and without accountability on both the HR and supervisor side, many organizations will continue to muddle along being torn between stubborn disrespect for the seriousness of assessment, intellectual laziness, and fear of the unknown.

  2. Well said, Wendell. And the financial opportunity costs are enormous.
    More importantly, we are now able to quantify what they are. Leaders manage what they measure. Dr. Wayne Cascio has been reported to say that the gap between traditional and best hiring practices costs between 20-50% of human asset spend. My own field studies support those impact percentages. So what does that mean?

    Human asset spend is the total annual compensation paid to an employee. So the human asset spend for a hire is their total annual compensation times their expected tenure in years. For a software product engineer that costs $100,000 and stays an average of 4 years, that is $400,000.

    Now looking at the range of 20% to 50%— the 20% applies to entry-level hourly positions such as telemarketer, retail sales clerk, restaurant server, cook, bank teller, etc. A leverage of 30% applies for the entry-level technical or craft workforce. A leverage of 40% applies for experienced professionals and entry-level managers. A leverage of 50% applies for senior managers and executives and highly leveraged creative individuals (stock brokers, investment bankers, creative marketing talent, etc.).

    So returning to our software product engineer, even at a conservative leverage of 30% of spend, the opportunity cost dollars left on the table when a company follows traditional (subjective resume sort followed by 1on1 unstructured interviews and a reference check) hiring practices is $120,000 A HIRE. For each and every one!

    I was left speechless recently when addressing a room of HR Directors and VPs. (This was not a good thing, since I was the speaker at the time). I asked them to pick one position for which they hire more than 20 people in a normal year. (Last year wasn’t normal) Then I asked them to calculate the human asset spend for that hiring, and multiply it by the leverage factor appropriate for their position. I was stunned into silence when they could NOT DO IT. I told them it was OK to use the calculator in their cell phones. The two brave souls that actually came up with a number were off by two orders of magnitude! Get the picture? The people we have charged with understanding the importance of doing hiring right couldn’t multiply three numbers together to produce a quantitative Opportunity Cost Gap number to save their souls.

    We have to fix that or Wendell will be writing these articles from the other side before anything really happens. As Simon Cowell will soon no longer say, “Sorry, I’m just telling you how it is”.

  3. Hmmm. I may be missing something. If I understand this properly, the message is that by not following best hiring practices, the best people aren’t hired for a given position, and when this happens, lots of money is lost. *This makes sense. At the same time, there are some major assumptions at play here:
    1) We know what the best person for a given position is.
    2) Knowing this, we actually could hire this person- they don’t ask too much money, they’re available, they want to work for us, etc.
    3) If we institute what I prefer to call “Generally Accepted Recruiting Practices” (GARP) and our competitors don’t, we’ll get the person and they won’t.
    4) GARPs are a permanent rather than a temporary advantage- i.e. if we do it and they don’t (or even if they do,) we’ll be able to maintain our hiring advantage.
    5) There is no vested interest in the dysfunctional status quo- if you replaced the lazy or stupid HR person everything could get better.

    There are a number of other assumptions I could come up with if I had time, but these have many holes in them. IMHO, much of recruiting thrives BECAUSE of (not in spite of) these inefficiencies. So, am I saying we shouldn’t try to create and institute GARPs? Not at all- just that you should be prepared for less dramatic improvements and more resistance to their implementation than you’re likely to expect.

    Cheers,

    Keith

    * @ Tom: I would be interested in finding precisely how Dr. Cascio defines this “gap”.

  4. Hey Keith– Here is what you were missing.
    [1] We know how to systematically determine the characteristics of highly effective performers. It is called Job Modeling. It does take some effort and expertise, however.
    [2]We don’t have to hire some theoretical person for these numbers to work. We just need to hire an increased proportion of the best performers who apply. Some who apply won’t accept an offer, but not very many these days.
    [3]Again, we only need to hire the best of the talent that has thrown its hats (or scarves) in the ring. We don’t need to hire the reclusive passive candidate to reduce the cited opportunity costs.
    [4]Fair enough that if everyone uses “Best Practices” the competitive advantage from doing so will diminish. But more people will be doing the most valuable work for them more of the time. We all win from that. Good luck with that happening any time soon.
    [5]The buck stops with the person that has the power to make decisions, and that surely is NOT the HR person. Just examine corporate policy around the dollar signing authority for HR Managers, Directors, and executives. An astonishing percentage fall below $1000., in my experience. Yours? So if blaming ever helped things along, there is plenty of that to spread around. The issue from my perspective is “How do we fix it, since it is clearly broken?”

  5. Thanks, Dr. Janz-

    1] We know how to systematically determine the characteristics of highly effective performers. It is called Job Modeling. It does take some effort and expertise, however.
    KH: I like this idea. How much effort and expertise (aka: $$), and from whom?

    [2]We don’t have to hire some theoretical person for these numbers to work. We just need to hire an increased proportion of the best performers who apply. Some who apply won’t accept an offer, but not very many these days.
    KH: Seems like we have at least two different things here:
    1) Increasing the supply of the “best” candidates who apply and
    2) Making sure that an increased percentage of the best who apply actually accept.
    These might be related actions, or they might not.

    [3]Again, we only need to hire the best of the talent that has thrown its hats (or scarves) in the ring. We don’t need to hire the reclusive passive candidate to reduce the cited opportunity costs.
    KH: This might be the case if the applying candidates are considered adequate, but if the active applicant pool isn’t qualified….?
    I maintain that you need to operate under the belief that anyone you actually hire needs to be referred or sourced- to do otherwise is to be passive or reactive.

    [4]Fair enough that if everyone uses “Best Practices” the competitive advantage from doing so will diminish. But more people will be doing the most valuable work for them more of the time. We all win from that. Good luck with that happening any time soon.
    KH: I believe the assumption here is:
    If Excellent Candidate is not hired by Company A because of sloppy hiring and is instead hired by Company B, there is a net loss. That’s true from Company A’s perspective but not from Company B’s, or from Excellent Candidate’s perspective. I think the assumption is also that if you don’t institute GARPs, a given Excellent Candidate would not be doing the most valuable work most of the time. That again seems true from the perspective of Company A, but not from Company B’s, or Excellent Candidate’s.

    [5]The buck stops with the person that has the power to make decisions, and that surely is NOT the HR person. Just examine corporate policy around the dollar signing authority for HR Managers, Directors, and executives. An astonishing percentage fall below $1000., in my experience. Yours? So if blaming ever helped things along, there is plenty of that to spread around. The issue from my perspective is “How do we fix it, since it is clearly broken?”
    KH: This goes to my “vested dysfunctionality” point:
    In a corporate setting, something is broken if my boss says it’s broken. My job is to look good by making my boss look good, and if that happens to repair something that doesn’t seem to work, so much the better, but that isn’t the primary motivation.

    In a consultative setting, my job is to make as much money as possible “working” on a problem, not necessarily to solve it, which could limit my income.

    Fundamentally, my point is that in any given situation (however dysfunctional) some people benefit, and if you wish to improve the situation it would be best to know who those people are and how to get them on your side.

    Cheers,

    Keith

Leave a Comment

Your email address will not be published. Required fields are marked *