SELECTION MATTERS

The Chicken and the Egg - A Business Fable

Once there was a chicken farm in Arkansas.  Call it "Megachick."  It was organized into two major divisions:

Division 1 - the "Egg to Hatch" Division - was responsible for producing hatchlings. 

Division 2 - the "Chick to Sale" Division - was responsible for raising the chicks.

Then one day - a problem appeared! 

The new president of Megachick was looking at some reports and he noticed with alarm that apparently many chicks were dying too soon.  So he got the two division heads together and gave them orders to study the problem, identify the root causes, and report back within a month.

The SEVP of Egg-to-Hatch reported that the cause of the problem was crystal clear:

"Poor chick management explains it all!" he exclaimed.  "We provide Division 2 with the highest quality hatchlings.  We feed the brood hens plenty of nourishing food, maintain an optimal hatching environment, and subject the whole process to rigorous quality control, destroying any eggs that exhibit even the least signs of abnormality.  But we have heard that Division 2 skimps on food and inoculations, keeps their chicken houses too cold in winter and too hot in summer, doesn't give the chicks enough room to grow, and further stresses the chicks by allowing supervisors to play loud, raucous music 24x7!  No wonder they're all dropping like flies!"

"Not so," said the SEVP of Chick-to-Sale, cranking up her Powerpoint.  "The truth is that we are getting inferior hatchlings right from the start.  We take great care of them, but the brood hens Division 1 has been buying are genetically inferior. Their feed contains harmful hormones designed to increase egg production at the expense of quality.  Their QA program is a joke; they destroy only 1 egg in 1000 - way too low a percentage! In fact they only care about one thing - getting eggs to hatch.  Why, a lot of them are sick and abnormal when they're hatched, even though that doesn't show up for a while.  It's no wonder they're croaking like catfish in the Sahara!"

Now the president was truly perplexed.  Not knowing which one to believe, he instructed the two division heads to "reach out to each other" and "work toward a constructive solution in the spirit of open partnership". They were to present their solutions in 8 weeks.  But by then it was too late - seven weeks later, Megachick went belly up!

You may ask, "So what? My company doesn't raise chickens; we sell life insurance!"

Maybe, but look around and you'll see the Megachick story played out every day in the world of recruiting and talent management.  You might see an article on "How Bad Managers Drive Out Great Talent - Poor Retention Explained (P.S. Don't Blame Us Recruiters)" or another called "You Can't Turn A Sow's Ear Into A Silk Purse - How Poor Recruiting, Screening and Selection Practices Are Hurting Retention And Productivity (P.S. Don't Blame Us Managers)"!

In fact, both sides are right - both really are to blame - but mutual finger pointing only makes the problem worse.  The challenge for those responsible for company financial performance and risk management is how to hold everyone who has a part of the problem accountable for working with everyone else who has part of the problem - and getting it solved.

I mean, personally accountable.  Will that require knocking some heads together? Not accepting lame excuses? Demoting or firing some people? Spending some time and money? You bet, but with nearly 25% annual turnover in companies of over 5000 employees, and nearly half of new hires failing within 18 months of being hired (at a cost of at least 2X annual salary each), what have you got to lose?

For some excellent information on taking the first step - namely, establishing some meaningful recruitment and selection metrics - be sure to check out this great book by Dr. John Sullivan:

HR Metrics the World Class Way

Reference Checks are Essential to Making Quality Hires… So Why Not Do Them - and Do Them Right? (part 3)

Previous posts have featured the bad things that happen when organizations either fail to check references, or only do a cursory job.  If that wasn’t enough motivation, consider the benefits – successful reference checking gives you the ability to:

• Verify information gathered from interviews
• Gain additional insight into candidates from experiences and perceptions of others
• Obtain in-depth information about applicants’ past job performance and work habits
• Identify - and reject - individuals who are incompetent or have a history of work problems or chronic absenteeism
• Ferret out individuals who would be a poor fit for the job or the organization
• Realize rewards of increased productivity and reduced turnover

What’s not to like?  Well, unfortunately the current system - using the telephone to corral a reference and ask a few factual questions - is basically broken, inefficient, and ineffectual.  It can take multiple attempts over days to get hold of references who may or may not provide useful input.

“Yet even though it is often difficult or impossible to find out about an individual’s suitability for hire during the typical reference check,” Wendy Bliss points out, “employers must make the effort.”

Fortunately, the telephone is not the only option anymore.  With new advances in technology, it is now not only possible, but practical to collect useful and actionable information from references, using Web-based reference checking.

At this point, virtually anyone seeking employment has Internet access – and so do the vast majority of references, particularly supervisors and managers who can provide the best information about a candidate’s prior performance.  This means the difficulty in making contact with potential references via telephone disappears. 

Using a Web-based reference checking system also overcomes other hurdles to making the reference checking process simple and efficient – including the reluctance of references to provide information for fear of litigation.  A simple-to-obtain waiver on the part of the candidate releases the hiring company and the references from legal liability, and encourages references to give candid and truthful information.

A Web-based reference checking system provides a method of obtaining feedback from references that is objective, confidential, and consistent.  The same questions are asked concerning all candidates for a given position, adding to the employer’s protection against accusations of discriminatory hiring practices.

Reference checking via telephone still has its place, to be sure – in the hands of a skilled interviewer, with a willing participant, and when very specific or detailed insights are needed. With a web-based system, however, much of the drudgery associated with telephone-based references can be averted.

So from the standpoint of both employers and references, there are easy and economical ways to address the legal concerns around effective reference checking, and answer the business and legal imperatives:

“It has now become the employer’s responsibility to gather information about a potential employee. If the employer chooses to hire an individual without checking his or her background, then the employer must be willing to accept the risk that if something goes wrong after that person has started working for the company, it may be held responsible.”  Andler, Edward C., The Complete Reference Checking Handbook (AMACOM, 2003), p.60ff

That's all there is to it.

Reference Checks are Essential to Making Quality Hires… So Why Not Do Them - and Do Them Right? (Part 2)

As we were saying when we left off… There are less than 100 cases a year, on average, where a candidate sues a company because someone gave him or her a bad reference.  About the same number of organizations, though, get hit by negligent hiring lawsuits – and they pose a much greater threat to corporations worried about liability issues.

Why? For one thing, the money.  The average settlement in lawsuits for negligent hiring exceeds $1.6 million (Bliss, Wendy, J.D., Legal, Effective References (SHRM, 2001), p.7.)

But even more importantly, let’s think in terms of damage.  In the former case, the suit comes about because someone didn’t get a job they wanted.  In the latter case, someone got ripped off, sexually harassed, or physically harmed – possibly even killed – and the employer should have known that the person responsible might cause harm.

“These checks are becoming increasingly important because of the liability issues involved in hiring and employment,” says Harry E. Chambers in his book Finding, Hiring, and Keeping Peak Performers (Perseus, 2001).   “If candidates have a history of behavioral or performance problems that should have been discovered through a reasonable pre- or post-employment search, your failure to uncover them could be judged as negligence if you employ them and problems occur that are consistent with their past patterns.  You could be held both personally and organizationally liable.” (p. 218)

So what is negligent hiring, exactly?  My company, SkillSurvey, obtained a legal opinion on this question.  (Of course, you’ll want to check with your own counsel.)

“[Negligent hiring] cases focus on defining what duty is owed by the employer to a third party when an employee commits a crime or other bad act… The consensus is that an employer may be found negligent if he knew or should have known that an employee had a propensity for conduct that would harm a third person.  (Coath v. Jones, 277 Pa. Super. 479, 419 A.2d 1249 (1980) and Restatement 2nd of Torts Section 317.)  The negligence may be found by an act of omission and the risk of harm must be foreseeable.  Given the multitude of employment settings, these cases are quite fact sensitive.” (Legal opinion for SkillSurvey from Elizabeth Anderson, Esq., 21 Feb 2005.)

Here’s a great example case, from an article by Charles S. White and Lawrence S. Kleiman, "Avoiding Negligent Hiring Liability: The Case of Mary Foley” (Contemporary Times, 1997, Spring Vol. 15 Issue 59, pg. 31-37):

“Consider the case of poor Mary Foley…Mary started a small temporary service company… she assigned a retired military man to a position as a night watchman at a warehouse.  What Mary did not know was that the man had never really been in the military... had a prior criminal record and current debt problems.  He took the easy way out by stealing equipment… Since he technically worked for the temporary employment firm, Mary got sued.  What is worse – Mary will probably lose the lawsuit.

"…Negligent hiring holds that an employer may be liable for employee acts even if they are outside the scope of employment. The requirements of this tort are satisfied when the offending employee is hired without an adequate background investigation and such an investigation would have indicated the applicant was a risk. Legally, negligent hiring is defined as: ‘The failure of an employer to exercise reasonable care in selecting an applicant in light of the risk created by the position to be filled.’ (Bates, Norman, “Understanding the Liability of Negligent Hiring,” Security Management, 1990, p.7A.) This definition means employers must screen individuals adequately before they are hired.”

And here’s another example that our legal expert found in the case law:

“In Brezenski v. World Truck Transfer, Inc., the Superior Court had to address the foreseeability issue and hence, the scope of an employer’s duty to protect third parties from harm.  It began its analysis by reiterating the principle that an employer may be held liable for negligence if it knew or should have known that an employee was ‘dangerous, careless or incompetent and such employment might create a situation where the employee’s conduct would harm a third person.’” (Anderson opinion, op.cit.)

So how does the legal system decide that an employer has been negligent?  “The fundamental issue is whether the employer has taken reasonable precautions to avoid hiring people who might pose a significant risk to others in the job that’s being filled.  The courts have consistently ruled therefore, that employers must obtain a detailed history of the applicant’s background, in order to avoid liability due to negligent hiring.” (Hoffman, Edward, Psychological Testing at Work (McGraw-Hill, 2002), p.41.)

So what’s “reasonable”?  How detailed a check is “adequate”?  Here’s another case that offers some guidance:

“…[A decision by the Pennsylvania Superior Court] in R.A. v. First Church of Christ, 748 A.2d 692 (2000) … involved an action against a church for its alleged failure to properly hire and supervise a minister who sexually abused R.A., a minor.  Prior to being hired by First Church, the minister had no criminal record and had not been investigated for the commission of a crime.  He completed a questionnaire and submitted a videotape sermon along with a resume and a list of fourteen references.  None of the references provided any information suggesting that the minister had ever committed a crime or had a history of sexual misconduct.  The minister submitted to a lengthy interview which went well.  He visited with the elders and members of First Church prior to his hire.

“After R.A. was assaulted, the minister was indicted and he eventually pled guilty to numerous counts of rape and similar offenses.  Plaintiffs, R.A.’s parents, sued both First Church and the minister.  The trial court granted the church’s motion for summary judgment, prompting plaintiff’s appeal.

“The Superior Court addressed plaintiffs’ claim that First Church was negligent in its hiring and supervision of its minister (Citing Sections 213 and 317 of the Restatement 2nd of Torts).

“Plaintiffs alleged that had the church investigated the minister’s background more thoroughly, it would have learned of his homosexual affair in high school and of several other incidents of a sexual nature.  The Court found that the church’s hiring practices were ‘reasonably thorough’ and disagreed with the plaintiffs’ contention that the church had a duty to specifically inquire into all of the minister’s prior sexual conduct.  (Id., 698.)  It reiterated the many steps taken by the church to inquire into the minister’s background, none of which produced any negative results.

“R.A. supports the view that where a thorough background check fails to uncover something which would put a potential employer on notice of a problem which is directly related to the basis for the alleged misconduct, the employer will not be held liable.” (Anderson opinion, op.cit.)

So it’s not hard to make a reasonable effort and protect yourself from a potentially nasty lawsuit.  That would be reason enough to get rolling with an efficient and effective reference checking system … but just wait till next time, when we look at the positive benefits that reference checking can provide.

Reference Checks are Essential to Making Quality Hires… So Why Not Do Them - and Do Them Right? (Part 1)

It's back-to-school time - so let's start off with a review of what we already know (or might have learned but forgotten over the summer!), with a few blog entries on the need for (and benefits of) a robust reference checking system.

Let's open those spiral notebooks and jot down this great quote from Susan R. Meisinger, SPHR, president and CEO of SHRM:

"Being able to identify unqualified candidates during the recruiting process saves organizations time and money.  Employees provide the competitive edge for a successful business, making it critically important for organizations to be able to recruit the right people.  With new technologies, reference and background checking has become easier to conduct and increasingly more important to organizations who want to get a complete picture of the job candidates they consider hiring."

Seems like a no-brainer, doesn’t it?  Avoiding the dreaded “bad hire” – with all the risks it carries, not just to productivity and bottom-line results, but also to corporate reputation and legal liability – has become more and more crucial, and a solid, robust reference checking system is broadly accepted as a key tool for accomplishing that goal.

But in some companies, the reference check has gone the way of the transistor radio – maybe listened to occasionally, but generally forgotten.  In part, this is because of a mostly baseless fear of litigation has driven companies to restrict the amount and kinds of information that employees can divulge about their former co-workers – and in part it’s because it’s just hard to get a reference on the phone in the first place.  The process as presently done may just seem like a big waste of time, particularly when the need is to get someone into that empty chair as soon as possible.

Maybe we need to refresh our memories about the kinds of major risks that companies can run when reference checks either aren’t done at all, or aren’t taken seriously as part of the selection process.  Here’s a biggie:

Excessive turnover, lost productivity, theft and dishonesty directly impacting the hiring company.

• “It makes sense to adopt a requirement that no individual will be hired unless and until satisfactory references are first obtained.  This may seem like an overly strict policy given sometimes stiff competition for even minimally qualified employees and the need for speed in hiring.  However, to hire someone without the benefit of adequate job references is to risk employing an unfit individual whose poor performance or dangerous propensities could expose your company to theft, accidents, workplace violence, or a negligent hiring lawsuit.” -- Bliss, Wendy, J.D., Legal, Effective References (SHRM, 2001), p. 61 (emphasis added)
• Approximately two million acts of violence occur in US workplaces annually, according to a July 1998 report by the US Department of Justice.  Workplace violence costs American businesses an estimated $36 billion per year.
• Ninety-five percent of US businesses have been victims of fraud by trusted employees, reports American Background Information Services, Inc.  According to the US Chamber of Commerce, employee dishonesty costs businesses 1% to 2% of gross sales.  (Cited by Bliss, op. cit., p.6)

And ironically enough (considering that companies are loathe to give reference information because of possible legal liability), the possibility of negligent hiring lawsuits provides an even more compelling reason for conducting reference checks - but more about that in the next post...

What 2.5 Million Employees Told Dr. Sirota About Their Companies… And Why You Should Listen

I had the pleasure of seeing Dr. David Sirota speak recently at a monthly meeting of the NY HR Planning Society.  Dr. Sirota has been a legend in the HR field for more than 30 years   He has a total commitment to – and rigorous methods for – finding the truth about human resource issues and how they affect corporate success.  He has a new book titled The Enthusiastic Employee: How Companies Profit by Giving Employees What They Want.

Here are some findings from his latest research – conducted in 237 organizations over 10 years with a total of 2,537,656 respondents:

• Most new hires are pumped up - eager, optimistic, enthusiastic, and hard working.
• But in 86% of US companies, the honeymoon is brief.  After 6 months, morale starts dropping - people become discouraged, demotivated, and withdrawn.
• Turnover and absenteeism climb, and work quality, efficiency and customer satisfaction drop

The primary culprit is the way many company cultures impact employees.

3 negative and corrosive cultures identified by Dr. Sirota are:

1. Paternalistic cultures treat employees as children.
2. Adversarial cultures treat employees as enemies.
3. Transactional cultures treat employees as “ciphers” - i.e. “I don’t really know or care who you are - you work, I pay you, now we’re even.”

But there is good news too!  14 % of US companies consciously create corporate cultures that treat employees as partners or allies.  They extend the honeymoon period for a much longer time and they benefit in many ways.

• The stock performance of these “high morale” companies is 20.03% better than that of “industry comparison companies.”
• High morale organizations have significantly better rates of turnover and absenteeism.

How do high morale companies like Southwest Airlines, Nucorsteel, The Mayo Clinic and Keebler create the “alliance” culture?

All-parties (company and employees) focus on these critical values:

• Win/win: all parties recognize that they have business goals in common, and success of one party depends on the success of the other.
• Basic Trust: all parties trust each other’s intentions
• Long-term Perspective: everyone is committed to a long term relationship that will survive the short-term vicissitudes of business.
• Excellence: everyone sets high performance standards for themselves and each other.
• Competence: everyone has confidence in each other’s competence.
• Joint Decisions: everyone makes key decisions jointly on matters that affect each of them.
• Open Communication: all parties communicate with each other fully.
• Mutual Influence: all parties listen to and are influenced by each other.
• Mutual Assistance: all parties help each other perform.
• Recognition: all parties give recognition to each other for their contributions.
• Day to Day Treatment: all parties routinely treat each other with consideration and respect.
• Financial Sharing: to the extent that the collaboration is designed to generate improved financial results, the parties share equitably in those results.

Dr. Sirota’s research methods have been rigorous and thorough and his findings have been remarkably accurate and consistent over his more than thirty-year career.  His research goes broader and deeper than many others in the HR field, and has serious hard-edged bottom line implications.  We would all be well advised to take his findings seriously.  Until now, the problem has been getting the C-level executives to listen to experts like Dr. Sirota and understand that the future success of their organizations can depend on how well they address these issues.

To find out more - read Dr. Sirota’s book, check out his company website, or just call Sirota Survey Intelligence at 914-922-2515 - ask to speak to Bruce Segall  ([email protected]).   

Right Management Reports “Hiring Blunders Drain the Bottom Line”

Our colleagues at Right Management recently did a study of 444 companies, which revealed that replacing a bad hire can cost as much as five times the employee’s annual salary in recruitment, training, severance and lost productivity.  42% of the firms studied said a hiring blunder cost them twice the employee’s annual salary; while 26% said it cost them 3 times annual salary. 11% said it cost 5 times annual salary to correct the blunder. Only 15% reported that a bad hiring decision cost them as little as one times annual salary.

Typically, the higher the position, the more costly the hiring or succession mistake. “A bad senior level hire or promotion can severely damage a company’s external brand, affecting customer trust and loyalty, and resulting in a lost commercial opportunity,” said Mary Marcus of Right Management. Similarly, erosion of shareholder and investor confidence in leadership can also contribute to a decline in stock values.

Bad hires screw up the financial picture all the way down the line.  54% of study participants identified lost customers or market share as a primary result of a bad hire. 51% cited higher training costs, 44% higher recruitment costs and 40% higher severance costs.  Other outcomes of poor hiring decisions are non-monetary but cost organizations nevertheless. Examples are lower employee morale, identified by 68%, and decreased employee productivity, identified by 66%.

“Due to the rising cost of, and negative organizational impact from bad hiring and promotion decisions, more workplaces are turning to formal assessment processes,” added Marcus. “Formal assessment methods provide a broader picture of candidates under consideration, more consistency in management development, and people who are the best fit for the challenges of today and tomorrow."

The field of HR Metrics now gives us the ability to track, measure and monetize our activities and results - potentially transforming HR from a “soft” staff function to a full business partner with line-of-business leaders.

The key to making this work, however, is to actually do it, and then demonstrate positive results where it counts - and to corporate executive management, that means at the bottom line.

If People Still Think the SAT Works… How Can We Make Decent Hiring Decisions??

In my researches, I recently came across Malcolm Gladwell’s New Yorker article from 2001 on Stanley Kaplan, which also discusses the decision by the University of California to abandon its reliance on the SAT and move towards a more “holistic” admissions system.

Statistical analysis concluded that the SAT was “virtually useless as a tool for making admissions decisions.” The four year study of 78,000 freshmen demonstrated that the predictive validity of the student’s high school grade point average (always considered by the ETS as too subjective to be predictive) and the “SAT II” Achievement Tests (measuring what the student actually learned) was far greater than that of the “aptitude” based SAT!

Those findings rocked the academic world, and they should rock the world of business too.  Millions of students have taken the SAT, thousands of colleges have used it for years, and tens of millions of dollars have been poured into research and development.  So what could have gone wrong? Turns out the folks at ETS - and nearly all universities and colleges - have been making some bad assumptions all along.

The first assumption was that aptitude tests predict future performance more accurately than past performance does.  That turns out to be wrong - hard work and a track record of achievement are much greater predictors of success than “aptitude.” When the University of Texas starting admitting all students in the top 10% of their high school classes - regardless of their SAT scores - these students proved to be amazingly successful, often more successful than those with SAT scores 300 or so points higher.

The second assumption was that people wouldn’t try to skew the results – and that, of course, was way off base.  Whether it’s for getting into college or getting a job, most people in our world think that it pays to stack the deck in your favor if you possibly can.  Millions attend test preparation courses, buy and read prep books, and practice test-taking in order to appear better than they really are, and hey, it works – in fact, it’s a primary reason for SAT score inflation – and it works even better in prepping for the standardized personality tests that we use to qualify and help select candidates.  With all this work (call it preparation, or call it cheating) going on, it’s no wonder that nearly 50% of new hires in the US fail within 18 months!

So what’s the takeaway here? Simple: if we want to make better hires, we should work to understand and measure past success as the best predictor of future success.  Unlike the SAT or a personality profile, you can’t cram to produce a strong four-year academic record, or a 10-year career track record.  We must continue to explore and find better ways to determine how job candidates have actually behaved and performed throughout their careers. Their success – and ours – depends on it.

Let's get out of the Selection Stone Age

Over at the Electronic Recruiters Exchange Dr. Wendell Williams of ScientificSelection.com has posted an article called "How to Leave the Interviewing Stone Age," making the case for the primacy of behavioral interviewing in the selection process – which has prompted a spirited exchange between him and Lou Adler of The Adler Group, who pushes more for past performance as the best predictor of future performance. 

I’ve chimed in on the discussion myself.  I’d say Adler and Williams are splitting hairs - we need all the information we can get about candidates, and it’s not an either/or proposition.  If you had a method that gave you good information about both past behavior and past performance – information derived not from the candidate, but from the people who have seen the candidate in action - I think you’d be way ahead of the game, wouldn’t you?  Particularly if you could use that information to make your behavioral interviews more effective, and put past performance into the right context.  The hiring process has got too many problems at present for us to quibble about who’s got the magic bullet.

But It Was Just a Little Fib!

Back in Time Magazine's May 1st issue, there's a very interesting article from Lisa Takeuchi Cullen about candidates who pad their resumes (imagine that!).  Seems that some high-level executives have recently had resume fibs come back to haunt them... but those are just the cases we hear about.  Estimates of "resume enhancement" range from 14 to 43% - and as you already know, having a proven fibber in your ranks is an invitation to disaster.  No wonder the background screening industry has grown the way it has!

But the resume fib is just the tip of the iceberg when it comes to candidates trying to pull a fast one on recruiters and hiring managers.  We've recently reviewed a book on how to finesse psychometric tests, and guides to squeaking through the interview process are legion.  Why do recruiters rely so much on the most unreliable source for candidate information - namely, candidates themselves? Much better to get the skinny on a possible new hire from people who have seen the candidate in action!

What References Won't Tell You ... Can Hurt You!

What will references (almost) never tell you about a candidate? Only the most important information you need to avoid bad hires!

According to SHRM’s 2004 Reference and Background Checking Report, HR professionals giving traditional references (by phone or letter) are poor sources of critical data on current or former employees.  About half of respondents say they “always” provide information about, dates of employment (big deal!).  How much will they disclose that could help you to avoid hiring incompetents, the "ethically challenged" or lunatics? Virtually nil.

Here are some kinds of information about candidates that are essential to making low-risk selection decisions… and the percentage of HR professionals who say they “Never” or “Rarely” disclose such information:

	Never	Rarely	Total
Interpersonal Skills	74%	10%	84%
Work Ethic	75%	7%	82%
Personality Traits	78%	12%	90%
Violent or Bizarre Behavior	76%	9%	85%
Malpractice/Professional Disciplinary Action	82%	9%	91%
Job Performance	72%	9%	81%

Why not? For 64 % of HR professionals in large companies, it’s fear of legal action, such as defamation claims.  But as the report explains, not providing such information can actually prove dangerous to organizations trying to protect themselves - and if you're hiring, not managing to access it can also be dangerous.

Want to know the average annual number of Defamation Claims based on references given to potential employers?  99!!  That's right - only 99 in the entire US! (Compare this with 45 million people hired.)

Here’s the really interesting part.  According to SHRM, “policies put in place to prevent this liability by providing little or no employment information have begun to backfire… [About 100 organizations a year] are accused of being liable for not providing adequate warning about the threat posed by a former employee who went on to commit a crime at a future employer.”   Furthermore, about the same number face “accusations of negligent hiring for hiring an individual who goes on to harm another employee or customer or commits another crime as an employee.”  So providing adequate information doesn’t only protect you, it protects the next guy too.

Even though 40 states have enacted laws shielding reference providers from legal liability “if the reference was given in good faith (i.e. complete and accurate to the extent of the individual’s knowledge),” corporate legal departments have been very slow to react to this changed landscape.   The result? Bad hiring decisions, enormous annual turnover (30%) and billions of dollars in costs.

Given the pace of change in most legal departments, the prospects for getting fuller disclosure appear dim.  But there’s one bright spot - HR people (according to SHRM) are much more forthcoming if a candidate executes a waiver of liability. My organization, SkillSurvey, has been able to get a high volume of excellent information by giving reference providers a confidential and anonymous method of reporting on candidates’ competencies, past behavior and job qualifications via web-based surveys – that includes just such a candidate waiver.

There are other innovative methods available to secure the information we need to hire top performers and avoid getting stuck with losers.  While waiting for the legal glaciers to move, why not use them?

46% of US hires fail in the first 18 months on the job!!

Leadership IQ conducted a 3-year study of 5247 hiring managers from 312 companies as they hired over 20,000 employees.  Here's what the study disclosed:

• 46% of new hires failed in their first 18 months, i.e:
  • Were terminated
  • Left under pressure
  • Received significantly negative performance reviews
  • Received official disciplinary action
• Only 19% achieved unequivocal success
• Early failure is conclusive evidence that most of the fault was in the selection process. The cost is staggering - most companies monetize the cost of “bad hires” at a minimum of 2x salary.

But why are so many new hires failing? What are we missing?   Leadership IQ reports that “The study tracked new hires’ behaviors, performance and personality and interviewed all 5,247 hiring managers.  The top reasons for failure (and what recruiters and hiring managers were consistently missing) turn out to be lack of:

• Coachability (26%): ability to accept and implement feedback from bosses, colleagues, customers etc
• Emotional Intelligence (23%): ability to understand and manage one’s emotions, and accurately assess others’ emotions
• Motivation (17%): Sufficient drive to achieve one’s full potential and excel in the job
• Temperament(15%): Attitude and personality suited to the particular job and work environment
• Technical Competence (11%): Functional or technical skills required to do the job

And what can we do to correct the problem? I have four recommendations - It won’t be easy but it needs to be done!

1. Monetize the problem- put hard numbers to it in our own companies.
2. Measure and manage the problem as part of the corporate risk management process - consider it “operating risk."
3. Change the measurement/compensation system for recruiters and hiring managers. Stop rewarding recruiters for “selling loser candidates to hiring managers. Hold hiring managers accountable for selecting losers and not coaching/training them well enough to succeed.
4. Make sure everyone uses the best available tools for selection and candidate quality assurance:
   • Don’t just “train” people in behavioral interviewing - make everyone a “master." Develop techniques to allow interviewers to better investigate the areas most likely to be problems.
   • Consider using simulations of the work environment and more “trial marriages” for new employees.
   • Get input on candidates’ coachability, emotional IQ, ethics, reliability, effort level, etc. etc., directly from people who have managed, worked with or been customers of the candidate. Do thorough and effective reference checking before making the offer. There are new books, new techniques, new tools and new legal protections that can make getting information on the candidate “from the horse’s mouth” a lot more effective than it was a few years ago.

Clearly, Leadership IQ has pointed the way to some thing of great importance for all of our companies.  We need to heed this particular call to action NOW!

Do Personality Tests Really Help Companies Make Better Hiring Decisions?

Many companies have been relying on personality profiles to help figure out whether job candidates have what it takes to succeed. Use of these instruments increased dramatically when lawyers began telling companies to stop disclosing meaningful data about employees to prospective employers.

Although most staffing experts agree that there is no substitute for knowing how a candidate actually performed and behaved in past work situations, companies felt they no longer could get reliable data from business references.

But the validity of personality tests has always been questionable:

1. Many I/O psychologists, noting they were designed for coaching and counseling, caution against using these tests for selection

2. Nearly 50% of those taking the tests for selection purposes admit to cheating / putting down answers they think will get them hired

3. Some managers –anxious to fill jobs-simply give their favorite candidates the answers in advance

4. Validation Studies –usually conducted by the test vendors, often don’t meet strict scientific standards –e.g. –“reliability” and fail to account for the “self-fulfilling prophesy” effect

And now the cat is really out of the bag!

Dr Edward Hoffman’s book “Ace the Corporate Personality Test”(McGraw Hill) reveals there are actually only a few basic tests (with numerous variations).There are always right answers, and by knowing how the tests are constructed, what answers the test developers are looking for, and practicing (using sample tests provided) ,any candidate can “ace” any test out there.

As the cover states, this book "reveals the secret to making the grade and getting the job", shows you how to out-smart and psyche-out the personality tests required by the corporate world  '' and dramatically improve your score and frame your answers to fit the position you are seeking".

I have read it and I believe it works.  If you are a recruiter or a staffing manager you should read it too. Then ask yourself, “What happens if a significant percent of your candidates are using this book (and maybe at some point a website) to beat your test and get hired?” Alternatives? Maybe it’s time to re-look at some other selection tools. Reference checking  perhaps? There have been recent legal and technological breakthroughs  which are helping this former “gold standard” for employee selection regain its lost luster.

"Recruiting Is Sales" - Now There’s a Scary Thought!

"Recruiting is Sales"? I know it’s a popular idea and it’s generating a lot of press - but just think about it.  Right now:

• 46% of all new US hires fail in the first 18 months on the job--- because of bad hiring decisions  (according to Leadership IQ)

• A bad hire costs companies at least 2 times annual salary (according to Right Management)

And pundits in our field are publishing articles and posting blogs right and left telling us that "recruiting IS sales," and that the primary job of recruiters is to “sell” the candidates to hiring managers. So what happens when hiring managers have concerns about a candidate’s...

• technical skills

• relevant experience

• interpersonal skills

• leadership abilities

• or fit with the work environment?

According to these guys, the recruiter simply needs to shift into intense sales mode - “overcome objections” and “defend your candidate” - because chances are the hiring manager is just being cranky or has “weak assessment skills."  And remember that "you win!" when you sell the candidate to the hiring manager!

Let's face a basic fact:  we have a major candidate quality problem. Way too many "loser" candidates are being hired, only to be almost immediately flushed out of the system - because the selection system is badly broken and nobody will admit it or do anything about it.  But we must fix it – and soon!

I don’t mean to be too rough on recruiters, who after all are trying to do their jobs as currently defined, or the pundits who are simply trying to help them be more successful. But I strongly believe we have been defining success and the relationship between recruiter and hiring manager in a counterproductive way.  They need to be business partners – each with a stake in the candidate’s success for a year or more. 

We should begin looking at the recruiting/hiring process not as a sales transaction, but as an ongoing long term commitment - analogous to what happens when an insurance underwriter writes a piece of business: there is always a “tail.” Success is measured not when the business is written but on how it turns out later.  And the only thing worse than not writing business is writing BAD business.

We clearly need new and better tools and techniques for telling good candidates from bad ones, and for assessing the "quality of hire" in the mid- and long-term.  We must do whatever it takes to ensure that the "revolving talent door" stops spinning and that our corporations stop bleeding billions... over a preventable problem!                                 

Would Your Reference Checking Process Catch a Serial Killer?

Nurse Charles Cullen is in prison (for 397 years) for killing 40 patients in the 10 healthcare facilities where he worked over a span of 16 years.  In all those years, he never got a bad reference or background check - in spite of the fact that at seven of those hospitals he was either fired, placed under investigation, or forced to resign.

How could such a thing happen? And how could it happen with at least 5 other serial killers we know of with similar profiles? And especially – how could it happen when almost everyone Cullen worked with found him "scary" or "creepy" and suspected him of crimes ranging from drug theft to murder?

That’s right – when prospective employers called Cullen’s prior employers (and some didn’t bother to call) they were told nothing more than his dates of employment ... and because he had never been convicted of any crime, his background checks came back clean.

Investigators who have weighed in on this issue agree that it was fear of being sued for “defamation” that led hospitals’ attorneys to tell their clients not to share negative - but truthful - information about Cullen.

But how real is the defamation “bogeyman” that has created a “see no evil-speak no evil” policy in over 50% of US corporations?

Many organizations – like SHRM, and the 38 state legislatures that have passed laws protecting companies that give truthful but negative references - think the “defamation bogeyman” is just that: a myth that is doing a lot of harm and should go away.

In fact, on average there are less than 100 such cases brought in the US each year.

Every year, twice as many actions are brought for “negligent hire” where an employer has failed in their responsibility to look into a candidate's background and not hire them if there is something that would put the public or other employees at risk

What is your company’s policy? Does it facilitate large numbers of unqualified, unethical (or worse) job applicants being hired every year?

Nurse Cullen would like that