Organizations’ most important decision is who they hire, and this is particularly true today as they need higher-quality talent to achieve often loftier growth goals.
Talent management consultancy DDI, where the author works, surveyed more than 250 staffing directors and 2,000 new hires from 28 countries to provide perspectives on their organization’s selection processes. Staffing directors offered insights into what selection systems look like today, and new hires provided their view of how those systems are perceived. Organizations of all sizes are represented in the research, with a majority from multinational, for-profit organizations spanning 33 industries.
The research indicated that despite the thousands of dollars each new hire costs — according to Bersin & Associates, the average cost of hire in the U.S. is $3,479 — and the fact that organizations have had years of experience making these decisions, most still have trouble hiring the right person.
With every hire there is an inherent risk — that it won’t work out, that the new hire will fail, not fit in or wreak havoc. But the question talent leaders should be asking is: How can I minimize this risk? The key to making better hiring decisions is to know more and guess less about candidates. To do this:
Make a list. Fewer than half of the staffing directors DDI surveyed rate their hiring practices as effective, and the top reason they cite for hiring mistakes is an overreliance on the hiring manager’s evaluation. To combat this, organizations need to have a clear and specific understanding of evaluation criteria.
Talent leaders should first identify what they’re looking for — job-relevant factors that can predict success on the job. Consider combining existing requirements such as job descriptions, and stakeholder feedback such as manager and incumbent interviews or focus groups, to create a holistic profile of an effective candidate. Survey results indicate 3 out of every 5 organizations thoroughly determine what knowledge, skills, abilities and experiences their future employees should have.
Consider an insider for the job. Before talent managers open the doors to the hordes of people looking for work, they should determine if there is someone already inside the organization to consider. A 2011 study, “Paying More to Get Less: The Effects of External Hiring Versus Internal Mobility” from the University of Pennsylvania’s Wharton School demonstrated that external hires cost 18 to 20 percent more than internal ones and performed worse on the job.
Particularly for leadership positions, internal candidates tend to be more successful (Figure 1). Their organizational knowledge likely helps them to navigate more ambiguous waters.
Hiring from within also means lower recruitment costs and faster ramp-up time, and it sends a message that the organization believes in development. This could translate into more engaged employees who are willing to stay for growth opportunities.
Do the necessary homework. Gathering data about people is complicated because people are complicated. One method for information gathering won’t do the trick; a variety of methods — interviews, tests, simulations — are necessary to gather the information talent managers need to know about how candidates will perform.
Pre-employment tests and assessments are designed to screen job candidates, measure their capabilities and gather insight on how they will perform if placed in a role. For today’s hiring decisions, three tools — resume screening, a screening interview and a behavioral interview — were more widely used than others (Figure 2). Further, organizations that use more than three tools are often more effective at hiring.
Let candidates behind the curtain. Some 51 percent of newly hired employees are confident they made the right decision to come work for the company that hired them. For the other 49 percent, this means their productivity is suffering once they enter the job, and so is the company’s. It also means these employees are more likely to be looking for another job. That means the company’s hiring managers will have to go through the hiring process again.
The main complaint from new hires is that the hiring process failed to paint an accurate picture of the job. When asked what they wanted to know, new hires said they wanted broader, strategic information, such as the company’s anticipated future challenges. But they also craved basic information they were not getting, such as the position’s expectations and requirements and how their job relates to the bigger picture.
The study found the more talent leaders can share about the day-to-day job — projects candidates may work on, people they will need to influence, how much time they may spend in meetings — the more likely it is candidates will make the right decision when evaluating whether the job they’re being offered is a job they will enjoy and stay in for a long time (Figure 3).
Make use of the information advantage. When a new hire comes on board, it’s natural for all involved to breathe a collective sigh of relief. But it’s important to remember, to make this a win-win for organizations and new hires alike, new employees need to be coached to be successful.
Provide new hires with information about what will help them be successful and what could be a barrier to success. This information doesn’t belong in an HR file folder; it is best leveraged in the hands of hiring managers and their new hires during onboarding. Organizations that use hiring information to facilitate new-hire development have significantly more new hires who are confident in their decision to accept the job. For those new hires who are not confident in their decisions, only 1 percent of the organizations they worked for leveraged hiring data during development. For new hires who were very confident, 66 percent of their organizations leveraged hiring information.
On a broader scale, organizations with the time, resources and motivation to better understand and utilize talent intelligence have an advantage in today’s big data marketplace. Selection data in aggregate form can give the organization a look into its own strengths and weaknesses. But only 34 percent of staffing directors reported that their organization uses analytics to determine the success of talent acquisition strategies. This is a missed opportunity because analytics is a big differentiator for improved measures of overall talent such as the diversity, quality, engagement and turnover of employees hired in the past year.
These keys to success not only will ensure talent leaders have the right people in place to do their business, but they also will impact their businesses (Figure 4). Organizations that made better hiring decisions last year performed better than those that didn’t. As the future will bring new challenges, it’s important for talent leaders to remember the secret of human capital. When it comes to the person who greets employees at the door all the way up to the CEO, the same basic rule applies: Know more, guess less.
Jazmine Boatman manages DDI’s Center for Applied Behavioral Research. She can be reached at email@example.com.