The Evaluation of The Quality of Hiring Decisions
The Evaluation of The Quality of Hiring Decisions

The Evaluation of The Quality of Hiring Decisions

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Wherever the pandemic has not taken lives, it has taken something else that is valuable from each of us; economically, psychologically, or both at varying degrees. The measure of the dual collective global impact can never be quantified.

Economically, formal SMEs are estimated by the World Bank to make up 90% of businesses globally and more than 50% of employment worldwide. The ILO SCORE Programme survey indicates that micro, small, and medium-sized enterprises (MSMEs) represent more than 70% of global employment and 50% of GDP. The World Bank estimates that 600 million jobs will be needed by 2030 to absorb the growing global workforce. In emerging economies, it estimates that formal SMEs contribute up to 40% of national income (GDP) and the creation of 7 out of 10 jobs. The IMF’s report, Small and Medium Enterprises in the Pandemic Impact, Responses, and the Role of Development Finance highlights that in lower income economies where SMEs are the largest source of employment and delivery of goods and services; disruptions have major social and welfare implications for the poor and rural populations. The ILO Monitor: COVID-19 and the world of work. Seventh edition Updated estimates and analysis released 25th January, 2021 reports a reduction of the global labour force participation rate by 2.2 percentage points in 2020 to 58.7%. Global unemployment increased by 33 million in 2020, with the unemployment rate rising by 1.1 percentage points to 6.5%. Global labour income (before taking into account income support measures) in 2020 is estimated to have declined by 8.3%, which amounts to US$3.7 trillion, or 4.4% of global gross domestic product (GDP) .3. The largest labor income loss was experienced by workers in the Americas (10.3%), while the smallest loss was registered in Asia and the Pacific (6.6%). The report continues that the latest projections indicate a persistent work deficit in 2021. Drawing on, inter alia, IMF’s economic forecasts from October 2020, the baseline scenario projects a continued loss in working hours of 3.0% in 2021 relative to the fourth quarter of 2019, which corresponds to 90 million full-time equivalent (FTE) jobs.

Even from a surface-level reflection on the gravity of the situation, an individual would conclude that a re-examination of how and what one contributes at individual and organizational levels in relation to the net value contribution to society, the economy, and recovery as part of the collective, would be a logical undertaking.

First Who, Then What? – get the right people on the bus, a concept developed in Good to Great by Jim Collins – is crucial if the lessons from the global downturn 2007- 2008 have managed to get engrained into our organizational cultures and processes’ DNAs. The stakes now are higher than ever. Persistent wrong hiring for an SME may lead to annihilation and its valuable economic contribution and job creation potential along with it.

At every Hay Group Job Evaluation training program I attended, it was pointed out that the higher a role is in the organizational hierarchy, the longer it would take to spot mistakes, whereas in junior roles this occurs instantaneously or in a matter of days. I recall when I started the first job in my career at ANZ Grindlays Bank, employees were not authorized to apply for leave less than 14 consecutive days to allow for mistakes or irregularities, if any, to surface. It can be quite concerning that the real detrimental impact an individual in a top-level role, if unfit for it, may have on an organization can be viewed more clearly in retrospect when they may have moved on to damage another.

Interviewing to date remains one of the primary tools for selecting who gets on that bus across industries, whether as the only data point or one of several e.g., psychometric assessments, aptitude tests, assessment centers, references and more recently AI and facial expression analysis. When Thomas Edison, to whom many scholars link the origin of the employment interview, wanted to select one out of hundreds of applicants to assist him, he devised a series of 150 questions to evaluate their knowledge and developed a way of differentiating and selecting candidates from a large pool – A Brief History of the Employment Interview by Patrick Hauenstein, Ph.D. Unfortunately, interviews for some of the most critical roles at various levels are often not approached with similar diligence, preparation, training, or experience. Edison’s 150 questions to us may not pass the practicality test but can certainly be appreciated for the time and thoroughness invested in getting that decision right because it mattered, it mattered greatly. Some HR professionals may even be able to relate to a scenario or recall instances when they have been called out of meetings by enthusiastic hiring managers and asked if they could spare a few minutes to interview a candidate, probably handed CVs in the moment, that they have seen for the first time.

In Rethinking the Validity of Interviews for Employment Decision Making: Implications of Recent Developments in Meta-analysis (2015). By In-Sue Oh, Bennett E. Postlethwaite, Frank L. Schmidt one of the assumptions made in reaching the conclusion of the study that “Although the widely held belief is that structured, rather than unstructured, interviews are superior in validity, our results suggest that unstructured interviews may indeed possess greater validity than previously recognized. In other words, it may be the case that unstructured interviews are as valid as structured interviews” is that “likewise, unstructured interviews may be conducted by skilled human resource professionals or managers with significant interviewing experience and skill. Such interviewers may possess a repertoire of effective interview techniques (e.g., follow-up questions, interrogation or probing methods) that are applied rather consistently, though not identically, across candidates.” That however is frequently not the case in regions where recruitment and selection practices are not subject to legislation. Gut feeling is often expected by an interviewer to guide them to a perfect candidate instead of preparation and analysis. Although it is generally a trade-off, not just in the subsequent context where it is a choice between hiring a candidate who would get the job done fast or hiring for potential, but also in terms of skills. There are roles that require a high level of technical expertise in a specific area or innovation in addition to financial management ability. Finding candidates that have a combination of both may prove challenging. “When hiring, you have to make a trade-off. Do you hire someone who can get a job done fast, or do you hire him based on his potential for growth? My advice is: try to pick the second option. I didn’t always feel that way” – Jack Welch with Suzy Welch, Winning. Hiring for potential is an investment worth making in building winning teams.

Jack Welch also pointed out in Winning that you sometimes need to go with your gut on certain attributes when hiring, but the 4-E (And 1-P) Framework that framed hiring decisions in order to build winning teams at GE took him years to solidify. Malcolm Gladwell’s Blink contains interesting insights as to when intuition can be trusted and when it can be way off. Highly experienced executives in leading successful, profitable businesses where they have embedded effective Governance mechanisms into systems may decide to go with their gut. But it would be reasonable to conclude that they’ve had decades of taking accountability for their successes and failures and that illuminating intuition that they go by is hard-earned.

In his book Managing Oneself – originally published as an article in Harvard Business Review and in 2008 by the Harvard Business Press, Peter Drucker emphasized the need for feedback analysis in discovering our strengths: “The only way to discover your strengths is through feedback analysis. Whenever you make a key decision or take a key action, write down what you expect will happen. Nine or 12 months later, compare the actual results with your expectations.”

There’s value in evaluating the validity and results of processes, especially very expensive ones in terms of tangible as well as opportunity costs to organizations on the immediate, medium and long-terms. “It is natural to fall into a routine, unquestioning way of running a process. That’s why periodic process analyses can greatly increase both efficiency and effectiveness.” – Jac Fitz-Enz, The New HR Analytics which includes examples of how to measure processes and essays relating to why measurement is important.

HR Analytics has come a long way since Dr. Jac Fitz-Enz, CEO Human Capital Source, acknowledged world-wide as the father of human capital analytics published his article in Personnel Journal (the predecessor to Workforce Management) titled “The Measurement Imperative” in 1978. In 2015, a Bersin Deloitte Study showed only 17% of HR departments have an HR analytics function. In 2017, Bersin Deloitte reported that: “While 71% of companies see people analytics as a high priority in their organizations (31% rate it very important), progress has been slow. If we haven’t already transitioned as mentioned in his book, from cost per hire and time to fill requisitions to quality of hire and time to full productivity (TFP), it is now imperative under these global conditions. Kirk Hallowell’s essay, Roberta Versus The Inventory Control System: A Case Study In Human Capital Return On Investment provides an approach that is clearly defined.

Below is an example from the education sector using a simple “fit-for-purpose” process that can provide insights as to the quality of hiring decisions and time and cost investment outcomes in teacher development using performance evaluations across the teaching population through lesson observations, based on standards for the quality of teaching and learning in the classroom that include what constitutes a good lesson:

  1. Developing and sharing clear objectives with Higher-Order Thinking Skills (HOTS) and success criteria.
  2. Planning lessons that are active, collaborative, and cognitive.
  3. The use of a variety of resources to support student learning.
  4. Student engagement
  5. The frequency of ICT use for learning
  6. Planning for differentiation to support all groups
  7. The use of a variety of assessment strategies including peer and self-assessments.
Analysis of hiring performance results over a two-year period

A subsequent analysis of performance results over a two-year period reflects outcomes of the quality of hiring decisions where the number of teachers evaluated at a good level of performance has dropped in Year – 2 and teachers in the limited performance category have increased. 86.6% of the teacher population rated in the Very Limited Performance category are new hires which should trigger interventions at different levels as well as a review of the interviewing and selection process.

A review of human capital costs by department in relation to performance results should make it clear whether a school is investing more over time for a lesser or great quality of teaching in the classroom. This example can also be used to challenge certain assumptions like: “we can’t get good teachers because we’re not paying enough” – assuming the organization has obtained market survey pay data – before rushing to top management with a third quartile pay policy proposal in panic, it would be worth assessing whether those already appointed that are paid within the third quartile range or a little less as outliers, have delivered on the great performance expected or are they within the 86.6%.

The example may be simple or even be viewed as simplistic, but this is merely proposed as a starting point where no system for hiring decision validation is in place. Dr. Jac Fitz-Enz’s books on HC predictive analytics, Jac Fitz-Enz and John Mattox’s Predictive Analytics for Human Resources, Jean Paul Isson and Jesse S. Harriott’s People Analytics in the ERA of Big Data, Thomas H. Davenport, Jeanne G. Harris and Robert Morison’s Analytics at Work, Smarter Decisions, Better Results, the ROI Institute’s programs, and other work and research in the field of HC and predictive analytics are valuable resources for the improvement of the quality of decision making and predicting future outcomes by using existing data and statistical analysis. There are now degree programs from renowned universities in human capital analytics, a privilege that did not exist in 2013 when I first reached out to Dr. Jac Fitz-Enz requesting advice as to how I may pursue a qualification in that area.

How’s The Example Different from The Performance Management Process?

The challenge often lies in extracting useful data from performance management systems or appraisals if the objectives set do not diligently take into consideration the “what to measure?” The second challenge is to extract useful data from a competency section embedded in a performance management process in many organizations intended to measure or assess either potential or behaviors, but often missing the mark on the “how to measure?” The great work and research on the subject by Lyle M. Spencer Jr. and Signe M. Spencer in Competence At Work has unfortunately undergone many mutations in the professional world where the assessment of competencies may not serve the purposes for which they were originally intended.

For recruitment agencies, taking into account candidates’ years in service in organizations for which they recruit may be more indicative of their excellent sourcing capabilities than a list of their clientele. Although they are not accountable for making the relationship work between an organization and a new hire, it can however be presented as reflective of their dedicated efforts to understand organizational cultures of their clients and their commitment to transparency in sharing all the relevant information towards a candidate’s smooth transition into a role. It is recruitment with a view to long-term thriving partnerships.

Finally, a point worth noting is that interviews or other selection processes can individually be considered as one data point. Only when those data points are combined can they present a clearer path towards reaching a final decision.

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