Businesses have never done as much hiring as they do today. They’ve never spent as much money doing it. And they’ve never done a worse job of it.
For most of the post-World War II era, large corporations went about hiring this way: Human resources experts prepared a detailed job analysis to determine what tasks the job required and what attributes a good candidate should have. Ads were posted, and applicants applied. Then came the task of sorting through the applicants. That included skills tests, reference checks and extensive interviews.
Today’s approach couldn’t be more different. The recruiting and hiring function has been eviscerated. Many U.S. companies have outsourced much if not all of the hiring process to “recruitment process outsourcers,” which in turn often use subcontractors. At companies that still do their own recruitment and hiring, managers trying to fill open positions are largely left to figure out what the jobs require and what the ads should say. When applications come, applicant-tracking software sifts through them for keywords that the hiring managers want to see. And a new industry of vendors offers 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.
The big problem with all these new practices is that we don’t know whether they actually produce satisfactory hires. Only about a third of U.S. companies report that they monitor whether their hiring practices lead to good employees. Obsessed with new technologies and driving down costs, employers are largely ignoring the ultimate goal — making the best possible hires.
Here’s how the process should be revamped:
— DON’T POST ‘PHANTOM JOBS’: It costs nothing to post job openings on a company website. Thus it may be unsurprising that some of these jobs don’t really exist. Employers may simply be fishing for candidates. Often job ads stay up even after positions have been filled, to keep collecting candidates for future vacancies. Because these phantom jobs make the labor market look tighter than it really is, they are a problem for economic policymakers as well as for frustrated job seekers. Companies should take ads down when jobs are filled.
— DESIGN JOBS WITH REALISTIC REQUIREMENTS: Figuring out what the requirements of a job should be is a bigger challenge now, because so many companies have reduced the number of internal recruiters whose function, in part, is to push back on hiring managers’ wish lists. My earlier research found that companies piled on job requirements, baked them into the applicant-tracking software that sorted résumés according to binary decisions, and then found that virtually no applicants met all the criteria.
— RECONSIDER YOUR FOCUS ON PASSIVE CANDIDATES: Of the more than 20,000 talent professionals who responded to a LinkedIn survey in 2015, 86% said their recruiting organizations focused “very much so” or “to some extent” on passive candidates. The same survey shows that for self-identified “passive” job seekers the No. 1 factor that would encourage them to move is more money. For active candidates the top factor is better work and career opportunities. If you focus on passive candidates, think carefully about what that actually gets you.
— UNDERSTAND THE LIMITS OF REFERRALS: The most popular channel for finding new hires is through employee referrals. It seems like a cheap way to go, but does it produce better hires? Many employers think so. Research by Emilio Castilla and colleagues suggests otherwise: They find that when referrals work out better than other hires, it’s because their referrers look after them and essentially onboard them. If a referrer leaves before the new hire begins, the latter’s performance is no better than that of nonreferrals.
— MEASURE THE RESULTS: Few employers know which channel produces the best candidates at the lowest cost because they don’t track the outcomes.
Tata is an exception: For college recruiting, for example, it calculates which schools send it employees who perform the best, stay the longest and are paid the lowest starting wage. Other employers should follow suit.
— PERSUADE FEWER PEOPLE TO APPLY: The hiring industry pays a great deal of attention to “the funnel,” whereby readers of a company’s job postings become applicants, are interviewed and ultimately are offered jobs. And these days the main effort to improve hiring — virtually always aimed at making it faster and cheaper — is to shovel more applicants into the funnel. But it’s much better to go in the other direction, creating a smaller but better-qualified applicant pool to improve the yield. Collecting lots of applicants in a wide funnel means that a great many of them won’t fit the job or the company, so employers have to rely on the next step of the hiring process — selection — to weed them out. And employers aren’t good at that.
— TEST CANDIDATES’ STANDARD SKILLS: Since it can be difficult to glean sufficient information about an outside applicant’s past performance, what other predictors are good? There is remarkably little consensus even among experts. That’s mainly because a typical job can have many tasks and aspects, and different factors predict success at different tasks. There is general agreement, however, that testing to see whether individuals have standard skills is about the best we can do. Can the candidate speak French? Can she do simple programming tasks? And so forth.
— BE WARY OF VENDORS BEARING HIGH-TECH GIFTS: John Sumser, of HRExaminer, an online newsletter that focuses on HR technology, estimates that companies get five to seven pitches every day from vendors using data science to address HR issues. 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. But we don’t know whether any of these actually lead to better hires, because few of them are validated against actual job performance.
— REVAMP YOUR INTERVIEWING PROCESS: Interviews are arguably the most difficult technique to get right, because interviewers should stick to questions that predict good hires and ask them consistently across candidates. Just winging it and asking whatever comes to mind is next to useless. Think hard about whether your interviewing protocols make any sense.
It’s impossible to get better at hiring if you can’t tell whether the candidates you select become good employees. 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.
Peter Cappelli is the George W. Taylor professor of management at the Wharton School and a director of its Center for Human Resources. He is the author of several books, including “Will College Pay Off? A Guide to the Most Important Financial Decision You’ll Ever Make.”
