The Last Frontier: Can We Measure and Recruit for Success?

Recruiters have not paid very much attention to the quantitative side of quality of hire. We frequently talk about hiring manger satisfaction and other subjective measures of quality, but I don’t know of any recruiting function that has even tried to measure, quantitatively, the value or contribution of people who have been hired.

I have used examples in the past that place a value on a function within an organization in terms of its cumulative contribution to sales, number of patents produced, or depth of contact with a customer.

Yet, it has been hard to bring this down to an individual level and precisely say that employee A contributed X dollars of value. We never get to this level of precision (or even want to), but we are getting closer to understanding and measuring the skills and attributes that contribute to overall organizational success.

For example, which recruiter is the “best” in your department? Which assessment test provides a higher quality candidate? How much do diverse hires contribute to success? How many good candidates were rejected because of faulty assessment practices or inappropriate tools? We could add many more questions to this list, but getting answers even to these few is a challenge.

The answers require a standard that you would like to achieve, or a quantified definition of such concepts as “best” and “successful.” Once those have been defined, then the challenge is to find a process and tool to measure them.

Some firms, from Best Buy to IBM, are starting to do just this. They are applying quantitative measurements to talent management, recruiting, and HR. They are reaping profits and cost savings from doing so. As other organizations catch on to this, measurement will become a part of HR and recruiting. And this will put many recruiters and HR professionals in a strange space — that of determining with some level of certainty which people perform better than others, which managers have lower turnover, and which functions add the most value (revenue/loyalty/patents).

Most people are uncertain about quantitative measurement, not usually understanding what it means, and not quite believing that individuals can be assessed in such a way. And, measuring individuals’ outputs and contributions had been problematic.

By assessing for very specific capabilities and skills, we may be able to vastly improve the sales, innovation, and product development in our organizations. Imagine being able to says with a high level of certainty that a set of specific skills, obviously combined with organizational fit, would provide a more productive employee than some lesser set. We do this more or less subjectively today, but these tools would give us greater certainty and help remove favoritism and chance from the equation.

Today, we are starting to see sophisticated algorithms and software, some new HRIS tools along with CRM and specific measurement software that make it easier to gather data and mine it. Longitudinal studies can be carried out and base levels can be established so that the impact of future changes can be observed and correlated. Trends can be analyzed and patterns predicted. Some of the tools resemble those being used by Netflix and Amazon to recommend products (and predict which products will be most successful).

OrcaEyes is just one organization that is offering tools and services to help quantify the people side of business.

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One of the best ways to begin getting familiar with what’s going on is to at least skim through one of these resources.

Books are appearing which educate and explain the hows of measuring people and their performance. One example, Investing in People: Financial Impact of Human Resource Initiatives, is an SHRM-inspired book written by two big names in the HR measurement area: Wayne Cascio and John Bourdreau. In chapters titled “The High Cost of Employee Separation,” The Payoff from Enhanced Selection,” and “Costs and Benefits of HR Development Programs” they lay out an accessible framework for presenting HR data in a way that business managers can appreciate.

Another book, Reinventing Talent Management: How to Maximize Performance in the New Marketplace, was written by William A. Schiemann. Schiemann runs a consultancy that focuses on measurement. This book introduces the concept of “people equity” and shows how some employees are far more valuable than others. He also shows how to build equity and improve business performance in ways traceable to people.

Another excellent book, Talent is Overrated, by Geoff Colvin, does not take a quantitative position but does provide a different perspective on how to look at people both within your organization and candidates. His focus is on looking at what people can do and on how to become better at what you do. While not a book on prediction, it is informative and challenges some of our preconceived notions about people.

My own prediction is that quantitative HR is quietly going to replace most of traditional touchy-feely HR within a decade. This will transform organizations and how we think about work.

People are the now the most expensive asset that an organization has. Selecting the right people, the best people, is going to be more emphasized than in the past. I can envision CFOs and other executives using these quantitative tools to lessen the need for more people, to improve efficiencies, and to raise productivity. Mass hiring of lower quality people ended with this recession. Now the focus is on finding fewer people of higher quality with better skills. Our only challenge is to figure out what that means and how to measure it.

Kevin Wheeler is a globally known speaker, author, futurist, and consultant in talent management, human capital acquisition and learning & development. He has founded a number of organizations including the Future of Talent Institute, Global Learning Resources, Inc. and the Australasian Talent Conference, Ltd. He hosts Future of Talent Retreats in the U.S., Europe, and Australia. He writes frequently on LinkedIn, is a columnist for ERE.net, keynotes, and speaks at conferences and events globally, and advises firms on talent strategy. He has authored two books and hundreds of articles and white papers. He has a new book on recruiting that will be out in late summer of 2016. Prior to his current work, he had a 20+year corporate career in several San Francisco area tech and financial service firms. He has also been on the faculty of San Francisco State University and the University of San Francisco. He can be reached at kwheeler@futureoftalent.org.

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18 Comments on “The Last Frontier: Can We Measure and Recruit for Success?

  1. I credit Joe Murphy for opening my eyes on this topic. His websiteis full of good information,including a multi-part series and calculator application.

    Over a long flight, we discussed the criticality of scale and role combining into the difference between description and prediction. Sometimes you can do one, sometimes both, but at small scale and in leadership/creative roles, cause and effect break down rapidly.

    Over dependence on quant methods can be a huge risk factor- Boeing Commercial Aircraft went after one called RONA, leading to disaster, and we don’t even have to talk about sliced and diced AAA rated subprime loans that were mathematically wonderful.

    Like other powerful tools, there is reward in using quant methods well, but very bad things can happen when you don’t.

  2. I look forward to increasing quantified information re: hires as long as it does not lead to
    1) Increase in the amount work that a recruiter has to do-evaluating existing hires is certainly beyond the scope of Recruiting’s existing duties and competencies.
    2) Increased bureaucratization and slowing-down of the hiring process.
    3) A new weapon which inept hiring managers can use to shift blame from their own errors in hiring onto Recruiting.

    Cheers,

    Keith “Except for that, Mrs. Lincoln, What Did You Think of the Play?” Halperin

  3. This might all come with the warning we have become numb to…”past performance does not guarantee future success.”

    Of course a good performer may be more likely to perform in the future but work and the outcomes of work, can be a very complex process. I would argue that things like fit to the culture, relationship with management, peer group relations and support, personal health, compensation and a long list of other things impact measured results. And since those things are not fixed for any length of time, a stellar quantitative performer can fail miserably in the wrong situation.

    Selection of the right people for a position is still a bit of an art and cannot be boiled down to pure science. Having said that, give me every tool you can including anything from the quantitative side of the equation.

  4. @Dave: very well said! As you said, unless you base hiring purely on quantifiable factors like the results of tests, recruiting will remain partly an intuitive, creative field, and therein lies the big money…

    Keith

  5. Great article, Kevin. I fully agree with your following prediction:

    “My own prediction is that quantitative HR is quietly going to replace most of traditional touchy-feely HR within a decade. This will transform organizations and how we think about work.”

    Some of the work/books you mention are leading us in the right direction, particularly those of John Boudreau (USC Marshall School of Business). His “talentship” work about an HR decision science is a fascinating move in the right direction.

    What we all need to keep in mind that is while there is science (not just “art”) that great Recruiters use in their recruiting efforts (such as NLP), your discussion here is one of back-casting from market performance to “quantitative HR”.

    While I’m not suggesting over-analyzing, I do believe that key performance indicators and forward-looking metrics have their rightful place in the discussion.

    Wasn’t it that guy, Albert Einstein, that stated, “Make everything as simple as possible, but not simpler.”? Personally, I believe we’re over-simplifying when we state that Recruiting is “art”. Marketers used to say the same thing before a true decision science emerged, much like the Finance decision science emerged from the Accounting Practice.

  6. Thanks, Joshua, for your comments.

    I am a firm believer in trying to get better and better at measuring the things that really matter in a person for a specific type of work.

    But, even today, things we don’t understand we attribute to magic (or ESP or aliens). Yet, once we understand, these unknowns become science. The same is true of recruiting. As long as we don’t know how to or won’t take the time to assess and measure traits, characteristics, and skills and compare them to actual performance; we will continue to call recruiting an art. Once we can measure and predict, it will also become science.

    Magicians don’t make much money today except as entertainers. Recruiters who won’t learn to use quantitative tools will also not make much money and I don’t hold high hopes for them as entertainers, either.

  7. If You Don’t Measure It, Does It Exist?

    Kevin, you continue to invite exceptional dialogue and offer nourishing food for thought.

    Martin, thanks for the acknowledgment.

    Keith, I believe this is the second time in the recent past you make a reference to ‘effort’ and your preference for less, particularly in the area of candidate evaluation. Hold that thought.

    Here are a few questions around measurement discipline, the answers to which may be revealing.

    1. Ask your CFO – “How much has been invested in the data capture and analysis system you use to report EBITA?”

    2. Ask you EVP of Sales – “How much has been invested in the data capture and analysis system you use to report daily sales performance?”

    3. Ask you EVP of Manufacturing ; “How much has been invested in the data capture and analysis system you use to calculate process yield?”

    4. Then ask your EVP of HR (self) – “Howe much has been invested in the data capture and analysis system you use to create a differentiated work force?”

    In every case, for Fortune 1000 companies, the answer to the first three will be hundreds of thousands and in some cases millions of dollars. Unfortunately the answer to 4 typically pales by comparison. Why?

    I have never sat with an executive who stated their organization was just like their competition. In fact, great pride is expressed in how their people, their products, their services are different than others. The work that true talent-matricians (I just invented that) do is quantifying, to the degree possible, the variables that contribute to those differences. And Keith, that requires, rigor, discipline, experiment design, and time.

    Michael Porter of Harvard suggests competitive advantage comes from business processes which are difficult to copy. Authors Becker, Beatty, Huselid, in The Differentiated Workforce present a similar framework for evaluating HR practices that put forth a ‘Me Too’ or a Differentiated outcome. In their earlier work The Workforce Scorecard, they document those organization hiring a higher percentage of employees with validated evaluation methods achieve higher levels of financial performance. Aon and SHRM conducted a significant piece of research in the mid 1990s that included a glimpse at staffing process outcome. Survey participants stated the most lacking qualities in new hires were defined as work style, and basic reasoning. Those traits or attributes can be objectively evaluated. Companies stating they were most satisfied with staffing process outcomes were using the most comprehensive candidate evaluation methods.

    Yes Kevin, the future of staffing practices will include more measurement, more science, more accountability for understanding and managing process yield. There are exceptional methods to evaluate candidate-job fit. It can be measured, it can be analyzed and it can contribute to the bottom line. However, the practice leaders are already out there, doing the work that documents the practices that deliver results. Look at the 2010 ERE Award winner KeyBank. They reduced staffing waste in one position by over $1.7 million by bringing science and measurement rigor into their staffing process.

    To read more of my thoughts on this matter, visit my blog at http://www.shakercg.com/blog

  8. Has anyone managed people?

    Have you seen situations where your “best performers” turned to mush when certain conditions became present?

    Have you moved your staff from office space to another and seen a change in performance that could be attributed to the change?

    Have you ever changed systems or processes to see a star become an under performer?

    Have you ever been promoted/demoted and seen top results delivering employees move back to the middle of the pack after your departure and borderline performers become stars?

    Have you ever added or deleted a staff member to see a huge difference in the team performance?

    Have you ever seen an employee face a personal or family health issue that knocked them off course for months or years?

    The metrics and measures discussed are long over due and much needed to systemically improve the likelihood of success in HR functions. But just as jumbo jets have an “auto pilot” feature, it is not appropriate to use it for the duration of all flights. The metrics for HR can function as the “auto pilot” but on landings (hires)and takeoffs (fires) and in stormy weather (change)I prefer to have some experience at the helm if it is needed. An in all cases, I want the pilots to use every instrument and metric available to them to make good decisions.

    If we are discussing counter people at a fast food restaurant, I’m 100% in on purely metrics based decisions. If we are talking about knowledge workers, I think metrics are a part of a successful selection process.

  9. It’s interesting to compare two brilliant comments that appear to come to different conclusions: Both Dave and Joe make impeccable points based on their personal, proven expertise. How can they both be right?

    It’s simple really, defined in a single word: SCALE.

    Dave is talking about teams of maybe 5 to maybe 50 people, and he is dead right that if you try to manage and lead teams of that scale using only quant methods, you will have your butt handed to you on a plate by better leaders and decision makers.

    Joe is talking about hiring and managing thousands of people, and if you try to go forth in 2011 hiring at that scale but rejecting quant methods of assessment, performance/economic impact, and outcome alignment, you will find yourself drilled by more efficient competitors.

    This dichotomy is everywhere in our business- people who wear the title “recruiter” can range from a 22 year old clerk who processes paper applications at a warehouse to a silver-haired blueblood on Park Ave. with 25 names in her rolodex.

    Recruiting is a basic economic process, so it would be smart of everyone who writes and speaks about these issues to always present the scale case as part of the presentation of their ideas.

    The really tricky (and sometimes ironic) part is that Scale and Dollars are not synonyms. Very few C-level executives are hired, so the scale is small, but the dollar impact can be huge. The facts of life that Dave understands DO apply at those small scales, just as the undeniable truths that Joe understands can have huge dollar impacts for scaled talent management.

    These discussions often fall apart on that basis. I hope we who are most interested in these matters start to use scale as a normal part of our discourse: I think it would make a difference.

    Signed,

    Martin “I have never hired 2000 people at one time” Snyder

  10. Martin, great comment. Personally, I don’t believe Dave and Joe are that far apart. Joe is suggesting the natural progression toward more quantification and measurement. Dave is referring to the fact that there still needs to be a human “hand” in the talent evaluation and recruiting process. He also brings up a super point that there needs to be some level of intuition involved regarding selection of “knowledge workers”. I agree, and this reminds me of Malcolm Gladwell’s fascinating 2008/2009 article, “Most Likely to Succeed” (http://www.newyorker.com/reporting/2008/12/15/081215fa_fact_gladwell).

    To your mention of “Scale”, I also agree this is a crucial point. I’d even suggest that as volume goes up, the amount of the human “hand” in the process goes down. Unless a company hires more Recruiters, there are the constraints of time and capacity.

    Ultimately, I think the best course of action for us is to take heed to Kevin’s thoughts, predictions, and suggestions. Most of us here are lifelong learners, so I do believe it’s an exciting time to be in this space. It’s not to debate if Kevin is “right” or “wrong”, it’s to take heed and expand the discussion, correct? We spend a great deal of time pontificating over whether someone is founded in their views, while very little time expanding the discussion in its relevance.

    Quick Suggestion for ERE:

    On ERE as of late, I’ve seen many comments that are more based in skepticism and in the worst cases, blanket negativity. I understand this is a natural part of change . . . and leads me to ask if ERE could start 2 comment streams: one for those that want to debate whether the author is “right” or “wrong”, and others that want to expand the discussion further. So when you read an article, you could hypothetically click one of two buttons: ‘Debate/Rant’ or ‘Discuss/Expand’. This way, the comment streams themselves are more relevant – some of us want to further develop the ideas instead of debate them.

  11. Nice comment yourself Joshua-

    That’s why the Facebook “like” button is a nice innovation (patented?). Notice there is no “dislike” button- ever wonder why?

    Negativity is a strange phenomenon: its like certain trace minerals you need to survive- a little bit goes a long way, too much is harmful, but none is almost a guaranteed disaster.

    I have seen too many organizations where any negativity is crushed, and that’s where groupthink thrives. I have seen others where everyone is on a permanent downer, which is a mostly a self-fulfilling prophesy.

    Like other blog sites that have matured (think major sports, politics, etc.), there is a community here, and we have all settled into our roles, as happens in many communities. When new voices arrive, it’s good, because it can shake things up. The Recruiting Animal gave me the sobriquet “the Beadle”, and while he may be borderline insane, he is pretty insightful and observant.

    All of us have our tendencies.

    We can almost write each other’s comments at this point- but I don’t think its gone stale (yet), but your point about maintaining the quality is important- the best way to keep it fresh is to share articles and threads with people we don’t usually see on this site- I’m going to make a special effort to do that in the next few months.

    I did read Gladwell’s piece and I remember it well. It fits my hypothesis about scale perfectly. 53 players on a football team v. tens of thousands of public school teachers hired each year are worlds apart.

    Belichick will beat you with his players, and then he can beat you with your players, which says something about talent management and recruiting; but only at appropriate scale.

    Have fun with this link: you can make as much as Gladwell in the publishing biz !

    http://www.malcolmgladwellbookgenerator.com/

  12. Managers that start hiring for talent say that their hiring successes soar, employee turnover drops like a stone, and employee problems diminish substantially. The secret is in measuring the talent demanded by the job.

  13. Joshua, Love the spilt comment suggestion. Nice innovation.

    Martin’s comment about SCALE is spot on. Assessment, at it scientific core works the best in large scale. For validation analysis, you need a minimum of 100 people in the same job. The preference is for more like 250. Then you may have statistical significance.

    So look at any company and do a Pareto Analysis to define the top one or two jobs with incumbent populations large enough to take advantage of scale. Begin there.

    Dave – I have managed people. And you provide excellent examples of one-off instances, which do occur on a regular basis. Organizations can track (and some do) the impact of select managers on employee retention, production. And organizations with high standards for “play nice” behaviors take corrective action to change people, or change people. Assessment does not remove anomalies, it leverages distributed decision making across large populations, raising the likelihood or making more effective decisions on a consistent basis.

    The decision to advance a candidate or hire an individual should always be an act of human judgment. Assessments do not make decisions. The point of assessment is to add depth, objectivity and reliability to the data being used to make the hiring decision. We use this three part model to describe the role assessment can play:

    DESCRIBE – explain or depict information about an individual in a standardized, objective format
    COMPARE – provide data that allows one to contrast and distinguish similarities and difference among a group in terms such as ‘more of’, ‘less of’ and ‘the same as’
    EVALUATE – evidence based capabilities to group or rank individuals according to potential to perform job demands.

    Most assessments provide the first two. Only assessments that have been used in an internal (local) validation can really do the third. Validation analysis is an academic term for calibration. Without validation, many assumptions get made about how the assessment should be interpreted.

    Here are examples that provide some insight to the range and magnitude of what can be identified with well designed and properly implements candidate evaluation methods.

    We recently completed an analysis of hiring for a contact center. We were able to identify differences in competency profiles of team leaders that correlate to a 200% difference in productivity from the team. Knowing that information about a candidate early in the consideration process can help a recruiter know where to begin interviewing. In a retail management hiring environment, after a two year study, we were able to identify competency profile differences that correlate to a 20% higher level or associate retention, significantly higher levels of store profit, and more desirable results in the corporate engagement survey. In a high tech field service position, we were able to identify competency profile differences that correlate to higher first call repair rates. Each of these scenario created bottom line value that far exceeds the cost, increased recruiter efficiency and dramatically improved the candidate experience (a topic this thread has yet to touch on.)

    When you do the science well, you can get results that are quantifiable and that document process improvement.

  14. Great article and sharp comments. Drucker’s quote: “If you can’t measure it, you can’t manage it.”– applies particularly well to quality of hire. It is hard to do, but then, when was anything really worthwhile otherwise?

    Until the quiet revolution Kevin describes takes place, recruiters will screen candidates for “hireability” and NOT performance. Hireability is the likelihood of being well received by hiring managers or teams– sometimes remarkably different from the likelihood of actually adding the most value once on the job. That is why assessments are only now gaining a foothold and even when administered, are often under-valued. And when valued by an astute HR Director, viewed as a nuisance by hirring managers in the field.

    The story of jewelry store managers who kept a copy of an answer sheet from a previous candidate who ended up scoring well handy, so s/he could replace that candidate’s name with any new candidate that s/he liked (and thus make sure they scored well)— comes to mind. A recent trial at a restaurant chain where 200 candidates were tested and 57 hired, but the average test score of the rejects was higher than those hired and most of those hired somehow did not take the test. These events can ONLY happen because hiring managers don’t measure the financial impacts of quality of hire.

    When quality of hire does get tied to sales dollars or business unit P&L outcomes, it bears witness to the statement that graces almost all annual reports. You know the one. At one global convenience store chain, the store managers who scored in the green zone on the assessment contributed $18,000 more gross merchandise profit dollars a year to the corporate bottom line. At a well known coffee house chain, the DIFFERENCE in the profit contribution of the recommended vs. not recommended talent was over $20,000 a year. Multiply that by annual expected tenure of 5 plus years and a normal annual average hiring rate of 500+ managers a year (for both the convenience and coffee stores) and you are talking about serious money in anyone’s book.

    So I am looking forward to the quiet revolution Kevin foresees, and doing what I can to hurry it along. Help wanted.

  15. Tom your observations dont just take place in hiring (or other personnel selection like marriage!), we see it every day in selling technical solutions: what looks great at demo-time may mean little to long term ROI.

    Can’t tell you how many times people buy on “look and feel” only to find out later that the solution is under-featured or not fully developed. Sex sells, and we all make sub-optimal (on an objective basis) decisions based on emotion and style- it’s what makes us human and unique and why Consumer Reports rankings don’t automatically translate to sales rankings….but when we have more info, the better choice “looks” better too.

    One might think the science of buying behavior (Joshua) would be brought to bear on hiring too….

  16. Martin: No question we are all human, and hiring, along with other kinds of decisions, will never be completely algorithmic. Its also true that not all quantitative data is informative regarding the value of future job performance. Still, as you put it, “when we have more info, the better choice ‘looks’ better too.” Put another way, I find it a lot easier to like skillful, effective performers with strong people skills than I do lazy, deceptive, complainers with the people skills of a switch blade.

  17. @Joseph: I strongly believe that when the point of diminishing returns kicks in, it is better to do the same work in less time than more work in the same time.
    I suspect that what’s called the Jevons Paradox (energy savings through increased efficiency are offset by increased consumption http://www.newyorker.com/reporting/2010/12/20/101220fa_fact_owen) may apply to the realm of work as well- “We were doing OK before but this new technology lets us do SO MUCH MORE!”

    @ Dr. Janz: I think you put it very well.
    I inform hiring managers that there are precisely two things they need to establish with a candidate:
    1) How well can the person do the job we want them to do?
    (Theoretically highly objective and quantitative.)
    2) How comfortable do we feel working with this person for an extended period of time- do we like them?
    (Theoretically highly subjective and qualitative.)

    I am very strongly in favor of using whatever verifiable tools and techniques can be used to improve the former, and also believe that the developing field of Behavioral Recruiting (the application of Behavioral Economics to Recruiting) well help us to better understand the biases which work in the latter, but not eliminate them, since many are inherent. This is where the “art” comes in.

    Cheers,

    Keith

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