Using Data to Make Better Hires

Looking for a reliable, objective way to make the best hiring decisions?

Data analytics can improve the effectiveness of a company’s talent acquisition function, determine job competencies for each role and measure candidates’ potential performance before making a job offer.

Ultimately, recruiting and hiring data can be correlated with business outcomes such as increased revenue, which positions talent acquisition as a strategic function in the business, said Ji-A Min, head data scientist for Toronto-based recruiting technology company Ideal Candidate.

“Poor hiring choices aren’t just expensive to replace, they’re also expensive during their tenure and can damage the reputation of an entire organization,” said Erin Wood, senior talent measurement consultant with PAN—Performance Assessment Network, based in Indianapolis. “That’s why it’s surprising—with stakes so high—that organizations continue to make hiring decisions from gut feelings and subjective processes.”

Measuring Recruitment Effectiveness

Recruitment effectiveness is how well companies take a candidate through the process, from applying for a job to receiving a job offer. Common ways that data can be used to measure recruitment effectiveness include by calculating cost-per-hire, time-to-fill, quality-of-hire and the employee turnover rate. There are some other areas to measure, as well.

“By monitoring the number of applicants, the number who pass screening processes and the number who then interview, you can start identifying gaps,” Wood said. “Are people falling out too greatly in one area? Are too few people getting from screening to an interview? Is it the other way around, and your screening process is leaving too many in the process, creating an overwhelming time commitment for hiring managers having to interview them?”

Min said employers can use talent data to create a matching algorithm that sifts through and prescreens candidates, reducing time-to-hire by replacing manual processes and increasing quality-of-hire by bypassing unconscious biases that interfere with hiring decisions. According to research featured in the Harvard Business Review, an algorithm increases the accuracy of selecting productive employees by more than 50 percent, she said.

Determining Job Competencies

HR can also use talent analytics to determine the needed job competencies, during a job analysis. Critical aspects of a job such as initiative, adaptability or financial acumen can be determined by assessing job incumbents and surveying supervisors in charge of these workers, Min said.

A full and thorough review of a job to determine what qualities make or break performance for that specific position helps employers understand both what a new hire needs to do, as well as the qualities necessary to achieve that. “Knowing these critical aspects of a job is the foundation. You build your hiring process around that foundation,” Wood said.

Knowing the value of Structured Assessments

Structured assessments can be tests like personality or cognitive exams, or a structured interview.

“I recommend using assessment tools that are based on previous research and theory, such as the ‘big five’ personality traits and job performance, and that have been validated for the specific job that you’re hiring for,” Min said. “Validity and reliability are statistical concepts, and you don’t need to be an expert in statistics to understand them, but at the very least, ensure that any assessment you use has been developed by people with substantive knowledge and training in psychometric assessment, industrial psychology and statistics.”

Wood said many organizations still lack standardized recruiting and hiring processes. “Despite clear research suggesting that we should have structured processes, many employers still use casual interviews, asking different questions that equate ‘getting to know you’ chitchat with a formal interview process.”

Instead, Wood advises hiring managers use job analysis findings during the interview to determine a candidate’s competence in different areas. She recommends having a set list of 10-12 questions and using the same set of standards to rate all of the candidates. “Consistent questioning will allow you to use better data and compare people ‘apples to apples’ to make better hiring choices,” she said.

“The pushback against using more-structured hiring processes is because both job candidates and hiring managers tend to find structured processes dehumanizing and dull,” Min said. “My response would be: Would you prefer your hiring process to be fun or do you want it to result in the best possible hires?”

Conducting a proper structured interview requires a lot of work including developing questions, creating anchored rating scales, taking notes and training interviewers, she said.

Picking the Right Assessments

Different competencies relate to job success. Measure candidates on multiple aspects to predict performance on a maximum level. “I hear all the time from employers, ‘I just want to hire smart workers,’ ” Wood said. “But ‘smart’ is not the only important factor in predicting performance. It’s tempting to think that if we hire the candidate with the highest GPA, they’ll be the best employee, but just because someone excels in statistics doesn’t mean that person necessarily will be able to work with clients or motivate others to perform.”

Wood said assessments fall into the following four types. A combination of these methods should be used to make the best hires:

• Assessing or testing the ability to perform a task or skill. This is an excellent predictor of performance and difficult to fake, she said. Drawbacks include that such an assessment often requires proctoring, and could be used in claims of adverse impact. “Physical tests that firefighters and police officers go through, for example, may adversely impact female candidates.”
• Measuring candidates’ likelihood to engage in different kinds of behaviors. Personality tests would fall in this bucket. “These can be faked, but they are usually controlled using complex scoring algorithms,” Wood said.
• Determining cultural fit. This kind of assessment can help identify what behaviors are required across the company to be successful as an employee. However, an organization should never use this tool alone to make a hiring decision, Wood said.
• Assessing leadership potential. Possible tools include a 360-degree multirater process, situational judgment assessment and emotional intelligence tests.

Roy Maurer is an online editor/manager for SHRM.

Follow him @SHRMRoy​