The following post is from the "Hiring with Insight" article series, which was designed to help high-growth small and medium-sized companies overcome problems associated with the early stages of company development (full article, with graphics and tables, can be accessed at http://blog.hireinsightselect.com [1]).

• High-growth SMEs are particularly sensitive to the actions and decisions made by employees.
• SMEs are at particular risk of making poor hiring decisions, compared to larger organizations.
  
• Three of the hiring methods most commonly used by SMEs do not help predict job success.
  
• Resume reviews, reference checks and unstructured interviews are among the worst ways to identify talent.

As a key decision-maker for a high-growth Small or Medium-sized Enterprise (SME), you understand how critical it is to make good hiring decisions. This is not to say that selecting the right people is not important for other organizations - in fact, it is one of the most vitally important aspects of running any business. However, in comparison to those at a more stable and established company, you know that individual contributors at a smaller firm can have an astounding impact on its continued performance.

Unfortunately, such organizations are also especially sensitive to bad hiring decisions, when the people selected do not have the qualities or abilities needed for success and generally fail to fit in with the culture of the team and company at large. And, in most cases, these poor decisions were made because hiring managers were unable to accurately predict success using more conventional selection methods.

This is not simply an assumption. Catano et al. reviewed the most commonly used selection instruments for their book, Recruitment and Selection in Canada, and found that SMEs were more likely, than larger organizations, to use traditional methods that did not accurately predict performance in a role. Possibly because such organizations do not have the same level of HR support, or are not as experienced with more sophisticated methods, they are very much at risk of making very costly mistakes when it comes to hiring. A change is needed.

The first step towards improvement is identifying the most ineffective methods that you may be using today and how they are costing you much more time, money and frustration than is necessary. For that reason, we will devote our attention in the remainder of this article to discussing the primary methods used by SMEs to recruit, screen and assess candidates. In the next edition of the Hiring with Insight Newsletter, we will provide information on more sophisticated methods that are not only less expensive, but will greatly improve the accuracy of your hiring decisions.

“Another key to the HOT 50’s success: they know the importance of top-notch employees. Some 90% report that the ability to attract and retain good workers has been critical to their growth, while 70% say they could have grown even faster were there not a shortage of qualified people. Moreover, while a bad hire is a major inconvenience for an established business, it can be lethal for a startup. That’s why the HOT 50 strive to find and keep top staff.”
- PROFIT magazine, October 2007

Resumes

By far the most frequently used screening tool, the resume or CV has for many years been the primary method companies use to identify appropriate candidates. In fact, researchers have found that 94% of SMEs relied on resume information when making selection decisions; our own experience suggests that in many cases it is the only method that they use before investing the considerable time and expense required to conduct final interviews. Worse, however, is that resume screening is also one of the most invalid and unreliable ways to predict performance. Our review of the research literature suggests three primary reasons for this.

Resumes are Inconsistent

If you have ever screened applicant resumes, you know how frustrating it can be, considering the differences between each in terms of the format chosen, writing skill, and the individual style and type of information included. Many include information that does not relate to the job at all and simply confuses what could be a clear and concise account of past experience.

Of course, this makes it extremely difficult for hiring managers, who are most interested in quickly finding out whether applicants have the basic job-related qualifications required. Unfortunately for applicants, this frustration can result in recruiters and hiring managers spending very little time on each resume, likely overlooking important information, and employing “short cuts” that often unintentionally weed out very capable individuals. For example, automated keyword searching was designed to find specific skills in a sea of inconsistent resumes, and is notorious for overlooking quality applicants who have described their background in a unique way.

Resumes Often Contain False Information

Resumes are basically a subjective self-report on what applicants feel will best “sell” their capabilities. Of course, in trying to persuade hiring managers that they are capable, many applicants exaggerate skills and experiences, leave out undesirable facts, and even outright lie about their qualifications.

In fact, Mike Aamodt, Professor of Psychology at Radford University, conducted a review of 15 studies on the subject and found that an average of 25% of resumes contain false information. This is extremely high, considering the weight that is typically placed on resume data, but should not be surprising - many people will embellish on a resume to ensure their spot at the interview table, knowing that such information is rarely verified.

Resume Information is Invalid

Perhaps the worst reason to rely on resume information alone is that the type of data typically included simply does not relate to performance on the job. When Hunter & Hunter conducted extensive research on the validity of different components of the resume - Experience, Education and Academic Achievement - they found that neither related particularly well to performance.

If we really thought about it, these research results make complete sense. Having ten years of experience in a job does not mean that one performed it very well - we all know senior employees who are not very good at their job, just as we know very talented and eager junior hires who consistently perform beyond our expectations.

The validity results for education are even less impressive - something that Steve Jobs (co-founder, Chairman and CEO of Apple computer...and college drop-out) would certainly agree with!

Reference Checks

Upwards of 72% of SMEs depend on standard reference checking to help determine applicant capabilities. The idea is that feedback from those who have worked with the applicant will help us confirm our opinions and uncover key problems that the individual may have failed to mention in a resume or interview.

Of course, if you’ve conducted traditional reference checks, you’ve likely found that the information gathered is not always helpful, particularly when it comes to finding out why not to hire a person. And the research to date would support that assertion, with most showing that past ratings provided by references generally do not relate to ratings given to employees once hired. Again, our review uncovered key reasons to avoid traditional reference checks, at least for anything beyond confirming basic background information.

References are Subjective

Like the resume, information gathered through reference checks is subjective; opinions provided that may not actually represent true performance or ability.

Yet many hiring managers still spend a considerable amount of time questioning references, who may not even be qualified to provide such information, have the skills to do so, or have known the candidate in enough of a capacity to predict success.

Reference Information has Low Variance

All of us have provided future employers with a list of references and likely none of us has chosen people who would provide negative feedback. To do so would put us at a serious disadvantage compared to other applicants.

The problem, of course, is that hiring managers end up with very positive information on every candidate and little to no information that would help them identify potential problems. It would be the same as trying to choose the best student in the class, when teachers give everyone the same gold star.

Reference checking can be useful if done correctly. Here are a few tips on increasing their effectiveness:

• Make sure that those providing references know that their comments are anonymous.
• Ask open-ended questions that are clearly related to job performance.
• Keep it positive. Instead of asking about weaknesses, ask about ways to help candidates reach their potential.
• Focus on key themes across raters, as opposed to “one-off” comments made by an individual.
• Use references to confirm information gathered by other methods to increase the validity of your entire hiring process.

Unstructured Interviews

The third most frequent method used by SMEs is the interview. I should be clear that I am referring to the commonly-used unstructured interview; more recent advancements in question development and interviewer training can help increase the validity of more structured interviews, although many companies still rely on the former outdated approach.

Research supports the need for improvement in the way SMEs interview potential hires. There are four main reasons why the traditional interview does not relate well to future performance.

Interviews are Not Standardized

Most traditional interviews are really just conversations between a candidate and hiring manager, with very little in the way of standard or consistent questions. This means that candidates’ chances of getting a job can be completely dependant on the interviewer’s mood and type of questions asked on a particular day.

Interviewers are also placed in a difficult situation, particularly when they have to compare candidates and decide who performed best. With different questions asked, and different answers given, it is nearly impossible to tell who is best suited to the job.

Interview Questions are Often Unrelated to the Job

Of the most common questions asked in an unstructured interview, many are unrelated to job performance. For example, asking applicants about their hobbies, or where they see themselves in ten years, typically result in answers that provide little value, and could even open you up to legal attack should unsuccessful candidates question job relevancy.

Individuals can Develop their Interview Skills

The key problem with standard interview techniques, as it relates to skill and practice, is that we are at risk of hiring people who do well when interviewed, despite their true ability on the job. For example, modest people are at a disadvantage in an unstructured interview, as they may not volunteer positive information that could be used to predict success.

More savvy candidates gain training in interviewing techniques, and are able to provide stock answers that are sure to impress an interviewer, regardless of accuracy. This is why many traditional interview questions are ineffective.

Some Interviewers are Biased

Studies by Springbett, and by Tucker and Rowe, demonstrate how quickly interviewers can form impressions, with many saying that they determine whether to hire within the first four to nine minutes of the interview. This is certainly not time enough to base decisions on fact, so we must assume that many are skewed by personal feelings and biases.

Without proper training, interviewers are at risk of making many types of errors in judgement related to certain biases. Many tend to choose candidates who are more like them, despite true ability and qualifications. Or they guide the interview favourably, and misinterpret a candidate’s answers, for those who impressed them early-on. In future, we will be devoting an entire article to the interview, and providing suggestions on how to develop a more valid and structured approach.

 

Clearly, using some of the more traditional approaches to selection is not going to help you identify the best candidates. In the next edition of this article series, we will be discussing more modern techniques that are highly related to success and providing tips on how to integrate them into your current hiring process.