Ten great candidates which one do you choose?

One of the biggest struggles with companies right now is finding the right talent. Some industries have large talent pools to choose from but others have dry wells with only a handful of candidates. How many rounds of interviews should there be and how much resources should be allocated to recruit a candidate?

Don A. Moore, a professor of management at the University of California, Berkeley’s Haas School of Business, breaks down hiring selectivity into three phases, in this video here. Those three phases are:

1. Variability in work performance

What is the difference between a high performing employee and one that underperform?

It’s the question of will putting in extra time to finding the right candidate be worth it. The amount of variance between these employees will determine the selectivity needed to find a good candidate. For instance, if a company hires for a position that involves moving a tray from one counter to another, the variance in performance is very slim. In contrast, another company needs to hire an executive that is in charge of running a department of 20 people, the performance has a lot larger of variance.

Interestingly enough, Moore points out that self selection plays a large part in the initial in the recruiting process for roles that have high variance in performance. People who do not feel they are qualified will simply not apply meaning that you will not have to go through billions of people to find a good candidate. In addition, what qualities contribute to the person’s success on the job? If there are multiple abilities then the variability goes up and the more time that a company should take into recruiting considerations.

2. Deciding the Selection Ratio

How many of your applicants do you hire?

Hiring a large amount of applicants is a high selection ratio, while a small amount is a low selection ratio. The more specific, and high variability the job is, the higher the selection ratio.

3. Utility per hire per year

How useful is each hire is and its ability to contribute for the company.

Breaking it down:

Utility per hire per year = Rxy * SDy * Zx

Rxy  = the correlation between the test and the on job performance.

SDy = is the variance in productivity of all of the applicants. Unfortunately, this is different to measure. The rule of thumb that is usually 40%.

Let’s say a salesman is paid $80,000 in salary + commission. According to the rule they should be producing $200,000 worth of value to their employer.

Zx  = average score is the predictor.

The most popular version of the selection process is the unstructured interview and unfortunately, the turn out it’s not very good at determining on how someone performs on the job. In fact, there is a 0.38 correlation, hence about one third of candidates who do well in the structure interview will do well in the job.

However, there are better approaches, in one of the most exhaustive surveys in research today, here are their findings:

The highest level of validity is work sample tests with General Mental Ability tests or integrity tests which are “used in industry to hire employees with reduced probability of counterproductive job behaviors, such as drinking or drugs on the job, fighting on the job, stealing from the employer, sabotaging equipment, and other undesirable behaviors.” Schmidt & Hunter, with GMAs. Those two different approaches can get as high as .63-.66, which is significantly better than in person unstructured interviews.

Overtime, employers can track how well potential candidates perform on these exams in order to determine whether or not they would be a good fit for the job. Try to avoid falling into the habit doing unstructured interviews and focusing more on different methods that have been proven to have a higher corollary in job performance.