Most employers don’t know whether their hiring methods actually produce good hires, or how much time or money it costs to fill jobs. They don’t review the outcomes of their methods.
“Obsessed with new technologies and driving down costs, they largely ignore the ultimate goal: making the best possible hires,” says Wharton labor researcher Peter Cappelli, in the Harvard Business Review article, “Your Approach to Hiring Is All Wrong.”
What this means to you
Go around the recruiting and hiring systems employers want you to use, because they don’t work.
Summary
Cappelli says the root cause of most hiring is drastically poor retention. You’re most likely to change jobs and employers because your current employer is unlikely to promote you and provide new opportunities internally. This creates churn in the labor market and, ultimately, results in tremendous costs to fill jobs — an average of $4,129 per job in the United States.
Excerpts
Where are the hiring metrics?
Only about a third of U.S. companies report that they monitor whether their hiring practices lead to good employees; few of them do so carefully, and only a minority even track cost per hire and time to hire. Imagine if the CEO asked how an advertising campaign had gone, and the response was “We have a good idea how long it took to roll out and what it cost, but we haven’t looked to see whether we’re selling more.”
Failure to develop employees
In the era of lifetime employment, from the end of World War II through the 1970s, corporations filled roughly 90% of their vacancies through promotions and lateral assignments. Today the figure is a third or less. When they hire from outside, organizations don’t have to pay to train and develop their employees. Since the restructuring waves of the early 1980s, it has been relatively easy to find experienced talent outside. Only 28% of talent acquisition leaders today report that internal candidates are an important source of people to fill vacancies—presumably because of less internal development and fewer clear career ladders.
More is bad, so scare away the applicants
Recruiting and hiring consultants and vendors estimate that about 2% of applicants receive offers. Unfortunately, the main effort to improve hiring—virtually always aimed at making it faster and cheaper—has been to shovel more applicants into the funnel.
Much better to go in the other direction: Create a smaller but better-qualified applicant pool to improve the yield… If the goal is to get better hires in a cost-effective manner, it’s more important to scare away candidates who don’t fit than to jam more candidates into the recruiting funnel.
Hiring good employees
How to determine which candidates to hire—what predicts who will be a good employee—has been rigorously studied at least since World War I. The personnel psychologists who investigated this have learned much about predicting good hires that contemporary organizations have since forgotten, such as that neither college grades nor unstructured sequential interviews (hopping from office to office) are a good predictor, whereas past performance is.
Since it can be difficult (if not impossible) to glean sufficient information about an outside applicant’s past performance, what other predictors are good? … There is general agreement… that testing to see whether individuals have standard skills is about the best we can do… Only 40% of employers, however, do any tests of skills or general abilities, including IQ. What are they doing instead? Seventy-four percent do drug tests, including for marijuana use…
The advice on selection is straightforward: Test for skills. Ask assessments vendors to show evidence that they can actually predict who the good employees will be. Do fewer, more-consistent interviews.
HR vendors: Fresh & cool but unvalidated
Be wary of vendors bearing high-tech gifts. Into the testing void has come a new group of entrepreneurs who either are data scientists or have them in tow. They bring a fresh approach to the hiring process—but often with little understanding of how hiring actually works… These vendors have all sorts of cool-sounding assessments, such as computer games that can be scored to predict who will be a good hire. We don’t know whether any of these actually lead to better hires, because few of them are validated against actual job performance.
Wild HR technology
When applications come—always electronically—applicant-tracking software sifts through them for key words that the hiring managers want to see. Then the process moves into the Wild West, where a new industry of vendors offer an astonishing array of smart-sounding tools that claim to predict who will be a good hire. They use voice recognition, body language, clues on social media, and especially machine learning algorithms—everything but tea leaves. Entire publications are devoted to what these vendors are doing.
News I want you to use
What all this tells us is that employers suck at hiring, and if you follow the rules the Employment System itself is likely to prevent you from landing a new job — because it doesn’t work. Go around!
Employers don’t assess outcomes of hiring methods
It’s impossible to get better at hiring if you can’t tell whether the candidates you select become good employees. If you don’t know where you’re going, any road will take you there. You must have a way to measure which employees are the best ones.
Why is that not getting through to companies? Surveyed employers say the main reason they don’t examine whether their practices lead to better hires is that measuring employee performance is difficult.
Treat your job search like a business task
Like the sales manager who asks, “Is what we’re doing generating sales?”, you must learn to ask, “Is what I’m doing getting me job offers?”
Your boss checks to see whether the work you are doing yields the expected results — that’s a business task.
- Pursue companies carefully — don’t chase job postings
- Look for managers who know how to recruit and hire
- Control your interactions with every employer
Just because employers behave like dummies when it comes to hiring doesn’t mean you have to play along or encourage them. Apply your business skills to the business task of getting the right job.
Organizations that don’t check to see how well their practices predict the quality of their hires are lacking in one of the most consequential aspects of modern business.
The truth hurts employers, but it hurts job seekers even more. I’ve only touched on what you can do to capitalize on Cappelli’s findings and suggestions. How can we use this news?
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Most companies don’t know how to determine if a candidate will be a good employee…..and only 28% consider internal candidates because most don’t do employee development.
Do any of these CEOs even realize that if they were to get a “good” employee, said employee is probably going to either leave or, worse, stay and atrophy?
Also, interesting anecdote regarding testing that companies do use: I used to work at a company where half the technical staff were pot smokers. These were people with technical degrees and/or years of experience. They were the ones responsible for new products and solving customer problems. All of them showed up to work sober, and they all made money for the company.
It was the people doing meth in the parking lot at lunch who were the drug problem.
It’s been a while since I was there, but I’m pretty sure if you applied to work on the technical side, they either waived the drug screen or just tossed the results.
YMMV.
@Chris: Cappelli points out that failure to develop employees seems to drive turnover — they leave because often there is no professional reason to stay.
Yes! I am going to bookmark this article and reference it in online discussions. I am sick and tired of being excoriated by HR/recruiters and being accused of “bashing” that sacred cow every time I point out the glaring, obvious flaws in this farce they call “the hiring process.”
My staffing firm works to find people permanent positions. New client asked us about our success rate, so we then asked them about theirs. They say they hope to be a “lifetime” employer and yet in the last 4 years have had 100% turnover of all new hires. Based on our conversation, my gut says they are horrible with training and I bet those long-term employees have developed a specific culture that rejects new hires. And they expect that we will magically do better in that environment?
@Annette: Everyone needs a course in outcomes analysis! We like to say business keeps moving faster and faster, but few bother to compare what the plan was to how it turned out. Too busy to figure out whether a method actually worked!
In terms of how job seekers could use this information, I think a good set of questions to ask employers would include those about how they track their hiring success. Obviously, an employer is going to ask about how well you did your previous job. Ask how the employer is doing its job.
Of course, this is a double-edged sword. I imagine a lot of employers wouldn’t like it when candidates ask, “So, what is your success rate in hiring the right people? In other words, what percentage of candidates are performing at their expected levels at 1, 3, and 5 years?” Note that the question is not “How many people are still here?” It’s what percentage are essentially good hires. Or you could be more open ended with things like, “How do you measure and track your recruiting process to ensure the best candidates are selected?”
Then again, such questions would make good screening questions for candidates. Employers who are doing it right would be happy to share such information. If the interviewer hems and haws, that’s a red flag.
@Chris: That’s fair play — and incredibly smart. Of course many employers won’t like such questions! It’s a quick way to weed them out!
Interesting information about promotions from within. Nick says that during an interview you should do the job. When I’ve been in places that tended to promote from within, the candidate was de facto promoted before being really promoted. If you are a good leader you should be able to lead without a title. It worked great. Also, the candidate could see if he or she really likes the next level job. If not, they can turn it down which is much better than promoting a person who is a bad match.
Well, I was able to use a choice quote from the article (about how recruiters are incentivized to negotiate salaries down) to refute a recruiter who stated “It’s in our best interest to get you a higher salary – the more you make, the more we make” (a line which I’ve heard on more than one occasion). I suppose I should have guessed something like that was the norm, because the recruiter’s client is not the candidate but the hiring company.
Still makes me mad that they misrepresent this to potential candidates in the never-ending debate about posting salary ranges in job postings. Of course, all the recruiters think posting salary ranges is an absolutely horrible idea, and all the job seekers are in favor of it because there would be less waste of time and effort on both sides.
We’ll see how Little Miss Recruiter responds. I’ll probably be evil incarnate for having the temerity to gainsay her, thereby sullying my online reputation and causing other recruiters to ignore me. But I have the last laugh: the recruiters already avoid me in droves! :)
@Askeladd: I’ve always put it this way to candidates: The employer pays my fee, so I have a fiduciary duty there. But long-term, my success depends on having many happy placements, because they are the source of the referrals I need to run my biz. So I will help negotiate the best deal I can for you — without jeopardizing an offer altogether. I need both sides to be happy and to trust me.
The rest is all about time — demonstrating that I really do what I say. Every good headhunter has to operate this way. It’s why I say 95% of “headhunters” aren’t worth working with. They’re too busy trying to close deals quickly to worry about their reputations.
I’d love to know what Ms. Recruiter tells you.
I understand that a recruiter’s primary obligation is to the one who writes his check, and I have no problem with that. That’s the way the business model is. But I think Miss Recruiter (who as of now has yet to respond) was disingenuous in her statement about what her best interests were, because the implicit takeaway was that job seekers should just roll over and trust the recruiter to mediate salary negotiations to get “the best possible deal” for the candidate. Yet we hear story after story of candidates getting gobsmacked by lowball offers, oftentimes out of step with the market, even.
As job seekers we want to have an idea of what the salary range is before we fill out onerous online applications, take stupid personality assessments of dubious quality, and interview sixteen ways to Sunday with everyone but the janitor. But somehow we’re a turnoff (according to HR/recruiters) if we want to know the salary range upfront, or we’re greedy if we’re “more interested in money” rather than culture or job satisfaction. I don’t know what color the sky is in their world, but here “culture” and “job satisfaction” don’t pay the bills. You’d think that HR/recruiters would embrace transparency and post the salary range – that’d be a real good way to weed out frivolous candidates and cut down on that flood of applications HR/recruiters are always bellyaching about.
But no, we’re the greedy bastards for wanting to cut to the chase before wasting time, money, and effort on pursuing a position that ultimately isn’t worth it. It would be so easy: “The salary range is $X – $Y…does that work for you?” That’s all we’re asking for. The way HR/recruiters squeal like a stuck pig on this issue, you’d think we’re asking them to sacrifice kittens or something.
Nick:
I’ve read your blog posts for years and have found most everything to be spot on. I think there is more to how badly HR does this part of thier job. The process of recruiting is in fact a sales and marketing effort. Companies are trying to sell people on working for their company and more importantly, NOT working for the competitor. If you are trying to direct a sales effort in your company, would you give that task to a risk-mitigation department? NO. Yet that’s what HR is. HR says they are looking for the “best candidates” (and I think in their minds they really believe they are) but with all the attempts to wash people out of the “qualified” candidates list they are getting precisely what they are *really after,* the *safest candidates*. These are the average and slightly better than average people who interview well and have a predictable resume. The things people really hire for – aptitude, willingness to learn, passion, drive, intensity, focus, communication and leadership skills, inventiveness, problem solving ability, emotional intelligence, soft skills… the list goes on – NONE of these are found on a resume. Yet the resume is used as the only screening tool to figure out who makes it to the interview. In addition, if they wish to qualify candidates (like any good sales person would) they would try to find things that would cause candidate to self-select out of the process so time wouldn’t be wasted – like that ridiculous phone call of “what salary will you work for?” Not listing the salary is incredibly wasteful. If you saw a really great Ford ad and went to the dealership interested in buying a Mustang the first question you’d ask is “how much?” Not listing the job salary is like that dealer saying to you “what do you think it’s worth?” Most people would do a 180 and WALK THE HELL OUT. If they would post the salary they would drastically reduce the amount of applicants to those who will really work for that company and prevent wasting a huge and precious amount of time (and money). I see applicant requirements steadily climbing, and why? When you don’t post a salary, everyone applies and soon you are getting director-level applicants for manager level positions. That skews the results and tells the person writing the requirements that they should jack them up – but the data is bad as those director-level folks wouldn’t work for that salary.
Regarding automation, in the process control world they say “if you have a crap process, automating just gives you crap more quickly.” The PROCESS of recruiting and hiring is beyond repair and needs removal and rethinking. 85% of hires STILL come from inside hires or inside referrals, yet tens of billions of dollars are being wasted on online systems and (worthless) ATS software – which many HR people are now cluing people in to “write your resume to include as many keywords in the job req as possible.” WHAT? What’s the point of having it then? It’s turned into a high-tech arms race simply to get someone to see your resume.
SMDH.
@David: HR operates like a sales department that buys lots of ad space to sell a complex, high-ticket product, then waits for “customers” to show up and beg to buy it without any idea what the price is. An awful lot of time gets wasted. Your analogy to sales is apt.
My question to follow is “Why doesn’t anyone in HR care about this? How come no one is addressing this with a anew model?” You’d think something with a track record of results would be highly valuable, marketable and profitable for whomever bothered to crack this code.
@Sue: You get what you pay for. Corporate boards of directors pay HR to deliver job applicants, not good hires. When we consider that only about a third of companies assess hiring methods against the quality of hires, it’s easy to see why HR doesn’t bother. Heck, employers don’t bother to assess the profitability of individual employees — so why would they do any real assessment at all?
Add to this the dirty little secret that corporate accounting systems do not track the cost of job vacancies, and you see just how pervasive the problem is. By shuffling more of the wrong candidates through the hiring process and not hiring them, HR “creates profit!”
I’m not suggesting HR intentionally undermines the quality of hiring. There are lots of very dedicated HR workers trying hard to do it right. But the very fabric of corporate “people management” is really just a sieve — enormous budgets flow right through it like water. The very system that HR sits on rewards HR for failing to do a good job of recruiting and hiring.
Finally, we must consider the competition to what you so wisely suggest would be a good thing. There is an entire “HR technology” industry marketing the idea that hiring is already automated. Not only is HR not doing its job; HR is funding it’s own competition! HR routinely dumps billions into an industry that undermines hiring. Job boards like LinkedIn, Indeed, ZipRecruiter all make money when employers keep coming back to buy more job candidates, not when jobs are filled.