Recruiting occupations are generally devoted to finding potential employees. HR occupations are generally devoted to managing paperwork and administering benefits. Training occupations are generally devoted to conducting workshops. But as far as I know, industrial psychology is the only occupation devoted to measuring and predicting individual performance. Practitioners in industrial psychology specialize in identifying competencies, building and validating tests, and evaluating people for jobs. We like to call ourselves “human performance experts,” although the term “test geeks” is probably more apt. Unlike business school consultants, industrial psychologists usually care less about the “building” (i.e., the organization as a whole) and more about each “brick” (i.e., how each individual employee performs). That is, we know every organization depends entirely on the sum contributions of its individual contributors. We also know that a random mix of qualified and unqualified contributors leads to low productivity, expensive mistakes, interpersonal conflict, high turnover, and so forth (can Martha Stewart make a gourmet meal out of Spam, RC Cola, and Moon Pies?). Fast, Good and Cheap ó Not! There’s a common phrase, “Fast, good, or cheap: Pick any two.” What it means for our world is that there is no such thing as a fast, good, and cheap solution in the employee performance arena. “Fast” and “cheap” usually equates to interviews and off-the-shelf tests. In spite of the fact there are about 50 years of published research showing that interviews are poor indicators of future performance, the majority of companies bury their heads in the sand and persist in using them. We need to realize that the best that most interviews can do is screen out blatantly unqualified applicants. The reminder get hired primarily because no one can find anything wrong with them. What about tests? Unless 1) the test has been built to predict job performance and 2) there is hard proof it predicts performance, most tests are probably as worthwhile as that letter from Mr. Okembo, Secretary General of Nigeria, offering me $3,000,000 in exchange for my bank account number. This is not rocket science. Almost anyone can see only 50% of new hires become high performers. The third part of the equation ó “good” ó requires clearly understanding what the job requires and measuring each applicant’s competency using trustworthy tools. What you measure is what you get. Of course the catch is, you have to give up fast and cheap in the process. Screen Doors It helps to think of a hiring and promotion system as a screen door with variable-sized holes. One can progressively reduce the size of the holes, eliminating more and more outdoor pests until the holes become so small they screen out everything. That’s the way a good hiring and promotion system works. It screens out people who cannot demonstrate they have the competencies to do the job. The standards can be loose (i.e., structured interviews) or highly stringent (systems that use multiple tests, structured interviews, and multiple measurements). The challenge, though, is how to decide the hole size that minimizes major performance problems. Suppose, for example, that a company has a turnover problem. The best solution would depend on knowing exactly why and when turnover occurred:
- Early stage
- If the problem is not knowing what the job requires, the solution might include adding a realistic job preview.
- If the problem is not being able to learn the job, the solution might include adding a test of learning ability.
- Mid stage
- If the problem is not being able to keep up with new developments, the solution might include adding a learning battery.
- If the problem is not being able to do the job, the solution might include adding a simulation.
- Mature stage
- If the problem is not liking the job, the solution might include adding a test of attitudes, interests and motivations.
- If the problem is being overqualified for the job, the solution might include setting lower pass-rate standards.
It is important to realize that solutions do not arrive with “no assembly required” stamped on the box. They take expert digging, exploration and verification. Adverse Impact Adverse impact has become a social stigma, like bad breath or body odor. We often hear executives say, “We don’t have enough ______. Find us more ______.” That’s clear. However, executives probably also expect ______ to do the job. In the real world, though, adverse impact is a political and statistical artifact, for example:
- Fewer females pass mechanical tests.
- Fewer males pass interpersonal skills tests.
- Fewer over 40 people pass physical ability tests.
- Short people are hired less often than tall people.
- Good-looking people are hired more often than ugly ones.
Almost all selection systems tend to have some kind of adverse impact depending on when and how you measure them. Adverse impact is a statistical measure, not an individual skills measure. No organization is required to hire unskilled people regardless of their demographic membership. They are only required to show that:
- Standards are based on job requirements.
- Standards are based on business necessity.
- Test scores (yes, that includes interview questions) accurately predict performance.
- Adverse impact is tracked and, if it occurs, the organization will try to find less methods with less impact.
Hiring someone who is unqualified just because they are diverse is foolish. Not only will it lead to a mixed bag of employee performance, it can attract lawsuits. Event the government uses tests to separate the skilled from the unskilled. Costs There are three costs associated with having a “good” hiring and promotion system:
- The time and money required to set it up
- The time required to learn how to use it
- The time and effort required to maintain it
I have worked with some folks who only wanted job analysis, validations, and test recommendations. They were convinced that everything else could be easily learned. Unfortunately, not true. They might as well buy a new car without wheels and tires (it’s going to be long drive home). Others go through the analysis, validation, and recommendations phase but fail to either use the system properly or maintain it by constantly following recommended procedures and reliability checks. This would be like buying our car with a full tank of gas and then never filling it up again. My recommendation? If it is not done right, don’t do it at all. Returns The cost of not adding “good” to a hiring and promotion system can be measured by looking at productivity losses ó which experts estimate to range from 30% to 50% of base salary. Even an organization with a $50,000 monthly payroll is estimated to lose $15,000 to $25,000 each month through bad decisions, turnover, low productivity, duplicate work, mistakes, additional workers, absenteeism, wasted training, and so forth. This is “chicken feed” compared with the cost of turnover or time to fill. In fact, a good hiring and promotion system will pay for itself within six months. It is as predictable as gravity. Fast, good, or cheap: Pick any two!