Predicting superior performance is all about having enough of the right information when you make people decisions. Having the right information allows you to achieve job fit. Simply put, job fit exists when the skills and attitudes of the employee are in line with the duties of the job, dynamics of the team, and values of your company.
Traditionally, employees use an interview to confirm the assumption that a person is competent and to look for compatibility with the company. To check for competence and compatibility, most employers do four things:
- Make a list of the attributes necessary to do the job and be a team member;
- Conduct an interview;
- Check references;
- Trust gut instinct.
That works … up to a point. A landmark Michigan State University study (Hunter & Hunter) and follow-up meta analysis (Hunter & Schmidt) however questions the reliability and even the validity of such an approach.
Based on the research, trusting your instincts and using the traditional unstructured interview leads to hiring decisions that have as much chance for a successful outcome as flipping a coin (0.14 reliability). Further evidence suggests that it is even harder to pinpoint compatibility than competence. That’s why so many employees are hired for skills and experience and fired because of attitude and behaviors.
Bad hiring decisions cost money. The cost of hiring the wrong employee doesn’t stop at human resources and manager time and the cost of advertising. The real cost of terminating the employment of an under-performing or troublesome employee and replacing him or her escalates when you factor in lost opportunity, lost productivity, training costs, additional recruiting costs, severance packages, and litigation. This hefty sum ranges from more than the annual salary for an hourly worker to nearly 20 times the annual salary of a key senior executive.
To attach real numbers to what it costs an employer to hire the right employee, I’ve prepared the following “funnel” and associated costs for using each of the most common hiring tools.
The process is cumulative. At the top of the funnel is the traditional interview when not used with background checks and assessments. At the bottom of the funnel is the whole person solution to hiring – when the hiring process incorporates multiple approaches. As you can see below, the cost of hiring a new or replacement employee almost doubles when employers use the interview and gut instinct compared to incorporating pre-employment tests into the employee selection process.
$19,230 – Traditional Interview
$16,129 – Reference Check
$14,492 – Behavioral and Personality Assessments
$13,513 – Abilities
$12,820 – Interests
$11,428 – Job Matching