Hiring Decisions: Big Data Isn't Enough
Friday, February 26th, 2016
The big data movement continues to gain momentum, and leaders are increasingly using a data-driven approach to make personnel selection decisions.
Moneyball, the story of the Oakland Athletics, provides a famous example of the power of using predictive analytics for player selection. General Manager Billy Beane applied rigorous statistical analysis to player evaluations, uncovering rare and unusual talent often overlooked by traditional scouting methods. By using data-driven strategies to find talent, Beane and other managers have found valuable players missed by scouts who use subjective observations or "gut feelings."
And the approach works. The Athletics have been consistently competitive against teams with much higher payrolls -- and have made the postseason eight times since 2000.
Business leaders are increasingly taking a data-driven, Moneyball approach to identifying talent and are bringing an increased focus on scientific interviewing and assessments to their talent acquisition efforts. And talented workers are well worth the effort it takes to hire them. Gallup meta-analysis results suggest that when companies select the top 20% most-talented candidates for a role, they frequently realize a 10% increase in productivity, a 20% increase in sales, a 30% increase in profitability, a 10% decrease in turnover and a 25% decrease in unscheduled absences.
But lackluster recruiting -- a recurring problem for some organizations -- may be undermining even the most advanced scientific interviews. When state-of-the-art predictive analytic models are used correctly, they can identify potential. But they can never make candidates more talented.
More Emphasis Needed on the Recruiting Phase
For leaders, this means that a lack of focus on the recruiting phase can produce a less-talented candidate pool. Efforts to hire employees with the talents to succeed in a role must start long before interviewing begins, as companies use recruiting efforts to target the right applicants.
Gallup has studied many world-class businesses and has come to understand how the very best develop their recruitment strategies. Here are two practices that some of the best companies use:
They use data and analytics for recruiting, not just when interviewing. That's right: Big data is for recruiting, too. Targeted, data-driven recruiting, complemented by scientific interviews, is vital to a hiring strategy that positions companies for long-term success.
For example, Gallup discovered that a group of military trainees in a particular unit were 1.5 times more likely to complete a rigorous training program if they had a friend or family member who had served in the unit. Along with many other traits that are linked to success, this practical, actionable finding can inform recruiters' efforts to find candidates who are most likely to succeed in training. Identifying characteristics like this can help recruiters focus their attention and know which recruiting investments might yield the greatest results.
Ultimately, recruiting is a numbers game. Candidates possess identifiable characteristics that predict successful performance, which companies can hone in on early in the recruiting process -- long before anyone has been interviewed -- to increase efficiency. Recruiting people with these characteristics increases the likelihood of hiring employees who will thrive in a role.
Establish clear expectations. Leaders need to establish expectations for recruiters that are clear, consistent and aligned with a recruiting strategy that will drive business outcomes. Setting crystal-clear role expectations for employees at all levels is one of the most important elements of creating an engaged and productive workforce. Gallup finds that when employees strongly agree that their manager helps them set performance goals, they are more than 8.5 times more likely to be engaged in their work compared with those who strongly disagree with this statement.
Setting the right expectations for recruiters not only encourages employee engagement, it also increases recruiters' effectiveness. For example, if a company rewards recruiters for filling roles quickly rather than for finding applicants with the right talents for success in a role, that company risks recruiting and hiring less-talented employees. With a workforce of mediocre players, performance suffers and companies may need to rehire more frequently -- an expensive problem, considering that some estimates for replacing mid-level workers are 1.5 times the employee's salary or more.
Recruiter expectations should balance speed and quality, and companies should structure incentives accordingly. If leaders only emphasize quantity of candidates or the time frame, they miss the mark; companies are best off when they equip recruiters to hire the right candidates the first time.
There is no question that top talent wins. But the process of finding the right talent starts long before interviews begin. It begins with recruiting the right people -- a process that requires knowing what to look for and setting the right recruiter expectations. At the end of the day, the most successful companies in the world -- whether professional athletics or big business -- are the best at recruiting.