Every savvy business leader knows that people are their most important asset. The people at our company and the ways in which we manage them have a greater impact on our success than strategy, finances, or any other resources.
So why are companies so bad at hiring?
Roughly 50% of all new hires fail within 18 months. It doesn’t matter whether we’re hiring for hourly, entry-level positions, executive roles, or somewhere in between, the failure rate is astronomically high. The problem is prevalent across all industries, affecting businesses both large and small.
Furthermore, every bad hire is incredibly costly. For a mid-level manager making $62,000 a year who is terminated after 2.5 years, the costs are estimated to total $840,000. This includes hiring expenses, compensation, costs of maintaining the employee, disruption costs, severance, mistakes, failures, and missed opportunities.
Businesses can’t afford such costly and ineffective hiring processes. However, despite the data on the process, most companies continue to hire just like they always have. If we want our teams to reach their full potential and reduce these exorbitant expenses, we need to look at why the process is broken – and implement validated methods to improve our hiring.
The Most Common Selection Processes Are Flawed
For decades, companies have selected candidates mostly based on their interview performance and their resume. The most important considerations when evaluating a candidate are typically their experience, their skills, their education, and the “gut feel” we get from an interview. Given the failure rates described above, it’s clear that these selection tools can’t accurately predict performance. When we closely examine the validity of these tools, it’s really no surprise that they lead us astray.
Education is perhaps the worst indicator. For some roles, such as doctors and lawyers, it’s obviously a necessary qualification. However, it’s largely irrelevant for most jobs.
In fact, consider this study led by Professor Frank Schmidt from the University of Iowa. He reviewed 100 years of research on personnel selection and found that education only offers 1% predictive ability! This isn’t a huge surprise when we consider that education is often irrelevant to the business world, and that many people can learn the same skills without ever going to college. It’s no wonder leading tech companies like Google and Apple are waiving education requirements for different positions.
Experience Isn’t the End-All, Be-All Either
While a lot of companies are shirking education requirements, experience requirements are still viewed as a dependable predictor of success. This isn’t strictly incorrect so much as it is short-sighted.
There are all too many candidates with years of success who never mastered a skill or delivered great results. Likewise, there are a lot of candidates who have a natural talent, learned fast, or otherwise started delivering great results within a year or two!
The point is, we can’t rely on experience alone to judge candidates. It disqualifies potential all-stars while including those who may have coasted through their entire career without ever truly performing.
Skills and Gut Feel
Understanding a candidate’s skills is clearly valuable, but all too often we take someone’s word that they are skilled at something without understanding the results they’ve achieved in prior roles.
And the “gut feel?” we get from interviewing someone? Well, if we were as good at hiring on gut feel as we think we are, we wouldn’t see such dismal failure rates!
Suffice to say, the classic selection tools aren’t reliable enough. But there are more effective methods at our disposal.
Structured Interviews that Focus on Results
Structured, results-based interviews are one of the most accessible and effective methods you can use to select the right candidates. The importance of structure is straightforward: we want to eliminate bias and independent variables from the equation as much as possible. In addition to legal protection, structured interviews make the selection process consistent and fair.
When it comes to focusing on results, most companies lose focus. We get so caught up in worrying about qualifications, degrees, years of experience and other credentials that we lose sight of what’s really important – results! Can the candidate deliver the results we need or not?
Our interviews must revolve around asking candidates what results they delivered in their prior role and how they contributed to the business’ success. The other credentials are important, but we need to make sure our new hire will be able to deliver the results we expect. Getting an idea of their ability to produce results is essential.
Using Scientifically Validated Pre-Hire Assessments
Part of what makes candidate selection so difficult is because unlike other decisions, we can’t assign numbers and hard values to candidates. Aside from the information on someone’s resume, we have very little data and measurable information on candidates. However, the right pre-hire assessment can change the game here.
If done right, assessments give us valuable data points that we can’t get from interviews or resumes. As a result, they allow us to predict performance in ways that would not otherwise be possible. In fact, they even allow us to predict team dynamics. We can get a better look at what type of person our team really needs, as well as who is going to succeed in the role.
Of course, choosing the right type of pre-hire assessment is critical. Our team at Qualigence is partial to the assessments offered by the Predictive Index and make extensive use of their Behavioral Assessment in particular. This assessment offers highly accurate insights on an individual’s behavior, which is relevant for virtually any open position.
Furthermore, this assessment can be completed in a matter of minutes, making it easy for existing employees and candidates alike to take the quiz. With data on both candidates and employees, we’re able to analyze how someone will fit into unique team dynamics.
Pre-hire assessments give us precious data points on making hiring decisions. Given that people are our most important assets, I’d say that’s pretty valuable!
It’s Clear Something Has to Change…Are You Ready to Innovate?
The verdict is clear: most hiring managers struggle to select the right candidates, and it has a dramatic effect on the organization’s bottom line. If we want to improve our results, we need a radically different approach.
We can do better. Are you ready to step up to the plate?
Please send me an email or reach out on social media with any questions you may have about the candidate selection process!