What's wrong with hiring?

In a world where human resources is trying hard to justify its existence while business quite literally ridicules the people practices, we are often left to introspect about reality. There are two main reasons for this, one, measures of people practices are very subjective (not that they can't be measured) and two, the impact of people practices are not realised immediately and even when realised, this happens very indirectly.

But not all is baseless. One aspect of HR which receives the least criticism and in my view is the least evolved is the hiring function. Addressed as hiring, recruitment or talent acquisition, practices pertaining to the function are in fact the most baseless and unfounded in management science. The measures of hiring function on the other hand are much more objective and can be measured with much more accuracy in a short frame of time.

Would you hire any different if you were to work for a competitor?

Ask this question and if your answer is no, well you are definitely not hiring right. But this clarity is a part of a bigger problem i.e. HR function not being strategic enough and/or not connecting to the business. The kind of people a company acquires is a single sustained source of advantage and a single source of loss too (once hired law makes it difficult to rid of a resource). While you may struggle to meet numbers for the right cost and time, without the broader principles in place, hiring may just not deliver what business needs.

It isn't uncommon to come across recruiters who would say that a glance at a resume would clearly tell them about the fitness of a candidate. Well thought out lab studies with resume have provided poor results. Resume/CV do not predict performance at work (r = 0.05 - 0.08), even with scientific methodology, let alone intuitive gut feel. Structured form based applications on the other hand are moderately better, yet disappointing (r = 0.12). 78% of resume/cvs have been found to be not simply inaccurate but fraudulent (SHRM study). So ultimately impressive resumes predict impression management, verbosity, some intelligence but neither competence nor performance. Unfortunately, this still persists as a screening process for hiring at almost all levels.

Unscientific Hiring Criteria (GPA, Campus, Credit Check...)

Use of any hiring criteria must be based on sound evidence. Credit checks, GPA, campus of graduation are criteria that have no basis in management science. Credit checks have small prediction value of (r=0.11) for entry level roles and negligible (r=0.05) for managerial roles. Similarly, GPA only predicts performance in training and the performance in first year post graduation. Post that GPA has meager correlations with job performance across roles. Campus of graduation and GMAT scores can only predict the income of an individual (r=0.49). However, they have no correlation with performance (r=0.007).

Numerous research papers cite that unstructured interviews are the least effective tools for hiring and many have found them to have negative correlations with long term performance. Similarly work experience in years, beyond three years in a role, doesn't predict performance across levels. In spite of their ineffectiveness in predicting work performance, these criteria are basic requirements for entering most organizations. Professional qualifications, reasoning tests, structured interviewing, personality assessments and/or situational judgment tests are far more predictive of performance and yet used the least.

While many say its ok to not get the best talent as long as we get the talent we want, it is a grave mistake. If as a company you are that pays at 70th Percentile in the market, having a talent below 70th Percentile is a bad deal. But how do we know the caliber of talent? No easy answers but a good indicator is the selection ratio. If you have had valid screening and selection mechanisms, you should not settle for hiring one of the three best out of 10 candidates. For mass roles within organization, this should be a golden rule when hiring. Usually hiring teams try to focus on meeting numbers for such roles. Besides, every bit of compromise is costly. Consider the fact that with every ten percentile increase in the caliber of talent, productivity increases exponentially. Employee at 90th percentile is at least seven times as productive as the average employee at 50th percentile.

Gut feel in all fairness can only be recommended when you have all candidates who seem to do equally well in all criteria of selection. That is the only possible scenario where hiring decisions based on gut can or should be acceptable. Eventually all gut feel amounts to individual projection biases. Any sustainable talent strategy should steer clear from it, not just when hiring, also while making other people decisions.

One reason why hiring professionals excessively rely on gut feel and unscientific practices is because there are no definitive qualifications for being one. One would assume that all recruiters should at least have basic understanding or personnel or occupational psychology. However this is far from what the market demands out of them. Other skills like behavioural interviewing and observation are also equally scarce. The danger of relying on experience eventually leads to a misplaced sense of what is right and acceptable in hiring.

The basic metrics that define hiring should be aggressively measured. While most hiring departments today measure, cost per hire, attrition and average time to hire, more important metrics like base rate (what percentage of screen pool was good enough for successive stages) and hit rate (what percentage of hired candidates were good performers) are rarely tracked.

Hiring right is the pre-requisite for all business both operationally and strategically. While numbers and cost factors are important to support business, the strategic component when ignored can corrode the business slowly. A scientific and proven approach to measurement however is necessary to deliver business impact. Its time to transform both our hiring as well as hiring talent.

References and Suggested Reading: