The stats are staggering: as much as 80% of employee turnover results from bad hires, from processes that don’t predict job performance.
Annual employee turnover in the US exceeds 50 million people. That means that approximately 40 million people leave their jobs – voluntarily or otherwise – because of poor hiring practices.
Predictive analytics in HR can show us where our recruitment process is failing – and how strategic changes can lead to improved employee engagement, productivity, and ultimately, profitability.
For companies, the cost of a bad hire depends on the role and various other factors. This cost is commonly estimated to be around 2.5x times salary: easily amounting to hundreds of thousands of dollars each time the wrong hire is made.
Lost productivity, the expense of running a hiring process, and the added costs of repetitive onboarding weigh heavily on companies of all sizes. Yet, we continue to use the same recruitment process, repeating the same mistakes time in and time out.
In this guide, we’ll take you through how to re-consider your screening, interview, and candidate assessment processes to find and place the right person the first time, as well as key metrics to track to make sure your hiring process is working.
Why traditional recruiting doesn’t predict future job performance
Points of failure exist throughout the traditional recruiting process. Eighty-five years of research prove that résumés – summaries of a person’s work experience and education – are entirely ineffective at predicting job performance. Structured interviews were found to be quite predictive when combined with cognitive assessments. Conversely, unstructured interviews were considered far less predictive.
It is no wonder that hiring decisions made based on résumés and unstructured interviews result in bad hiring decisions and, consequently, high employee turnover.
The predictors we use to identify top candidates are also flawed. Personality traits were found to not be strong indicators of performance with the exception of conscientiousness, which ranked very highly as a predictive trait. Reference checks, years of job experience, and assessment centers were all proven to be poor predictors. Years of education was found to be hardly predictive at all.
We’ll get into better predictors of job performance in the following sections, but first: here’s how traditional recruitment makes it hard to find the best fit for your open roles.
Roles aren’t clearly defined
The job description is one of the most important – yet consistently underrated – elements of the recruitment process. If you don’t define the role correctly the entire process will be flawed because nobody will have clarity about the kind of person you’re looking for.
A helpful starting place is to think about the purpose of the role. Why does it exist? Speak to the hiring manager as well as the rest of the team to find out what skills would make a candidate successful in this position.
A useful exercise is to spend some time with the team while they are working to observe:
- Their working style
- Challenges they face on the job
- Who they interact with, and in what medium
- The tasks that they usually perform
You can then translate this into what skills are necessary to execute the job. Even further, what skills are currently missing in the team that this role could make up for?
Include hard skills and soft skills in your evaluation of the role and the ideal candidate. Gather all the required responsibilities and skills required from the start to inform the rest of your job description.
We interview the wrong people
Screening is a necessary evil, especially in a high volume hiring event.
If there are only two applicants for a role, it’s easy to just interview them. But when there are 500+ applicants, a hiring team probably can only meet with five, or ten candidates at most. As a result, screening becomes synonymous with finding reasons to rule people out.
Alarmingly, screening is a process that favors the privileged. There are all kinds of hidden, unconscious biases that prevent great, qualified candidates from reaching the later stages. Recruiters often use nebulous terms like “culture fit” and “personality” or “attitude” as shorthand for selecting candidates who are similar to their own background.
These heuristics end up stifling diversity in hiring, hampering innovation, and preventing well-qualified candidates from advancing through the hiring process. Candidates who attended “the best schools” – and especially men – find it easier to get interviews. Women of color from lower-income backgrounds have the hardest time.
Interviews don’t predict job performance
According to Richard Nisbett, professor of psychology at the University of Michigan, interviews are totally useless.
“When it comes to choosing a candidate, [traditional] interviews are as much use as flipping a coin.”Richard Nisbett, Professor, University of Michigan
The entire format of the unstructured interview encourages candidates to tell us what we want to hear. Experienced interviewees even know what a recruiter is going to ask because every company asks the same questions. The worst interview questions, like “tell me about a time when”, “what are your weaknesses?” don’t provide any truly valuable information.
These interview questions try, and fail, to glean deeper insight about a candidate. Answers to these questions don’t really help us understand how someone will perform, what someone is like under pressure, or how they’ll build relationships.
Reference checks are performative
There’s a time and a place for reference checking, but not in the way they’ve been used historically. References are almost always positive. It’s a rigged game: no candidate is going to provide you with a contact who will give a less than glowing review.
If done correctly, reference checks can be very effective in setting candidates up for success. They help understand what it would be like to work with the candidate, how we can support them, and how we can get the best out of them. Instead of trying to verify a candidate’s ability, reference checks can be a great employee onboarding tool.
In fact, each of these stages in the recruitment process can be reconfigured or repurposed to better support hiring and long-term employee engagement. Here’s how.
What actually predicts job performance
As we’ve established, personality, unstructured interviews, and other predictors we use to identify top candidates are flawed.
If we care about merit – who can actually do the job – then we need to build a hiring process around people’s actual, real-time performance, not their claimed performance. We need to put people in the situations they are likely to face on the job and give them an opportunity to show what they can do. And, we need to do that with everyone, not just the privileged who pass the screening stage.
The best predictors of job performance are:
- Tracking and understanding employee performance metrics
- Integrating skills assessments into your recruiting process
- Replacing unstructured interviews with job auditions
Track employee performance metrics
As you seek to improve your job descriptions, it’s easy to fall into the trap of hidden bias. Instead of depending on heuristics, employee performance metrics can be utilized to identify the best performers and work backward.
See who has the best work quality, quantity, and efficiency metrics – and ask that employee to help build the skill test designed to predict the same level of success. Using an AI-powered platform like Vervoe, you’ll get an instant benchmark of performance that you can then tailor to your preferences.
Predictive analytics in HR has many benefits, not the least of which is in fine-tuning your recruiting. In one case study, Cornerstone examined the impact of “toxic employees” in the workplace – toxic referring to behaviors such as committing fraud, drug and alcohol abuse, or sexual harassment. Using a dataset of 63,000 employees, they identified 4% of workers as “toxic.” Cornerstone then used this dataset to identify key characteristics of toxic people, screening for these traits in the hiring process, and saving on productivity and other bad hire costs.
Integrate skill assessments into screening
Skills assessments are a far better way to simulate the job and predict future job performance than traditional interviews. Assessments allow recruiters to focus on the best person for the role; when used early in the recruitment process, skill assessments do the heavy lifting of screening candidates.
“Many companies can reduce costs and make better hires by using short, web-based tests as the first screening step. Such tests efficiently weed out the least-suitable applicants, leaving a smaller, better-qualified pool to undergo the more costly personalized aspects of the process.”– Harvard Business Review, “When Hiring, First Test, Then Interview”
Interviews rely on human judgment to predict job performance; online assessments, however, let candidates show off their skills, instead of rehearsed answers. With a well-designed assessment, you can see how candidates handle real scenarios that they will face in the role, in real-time.
It’s important to consider what are the key components of the role and then build these into the assessment. Include genuine challenges and situations that previous employees have had to handle in the role or those that you witnessed when you spent time with the team. These could include responding to a customer’s email, making a sales call, asking a coworker for a piece of work for a project or other situations they will be required to do in the position. This enables you to see the candidate’s responses without having to rely on self-report measures.
Replace traditional interviews with job auditions
The most innovative companies have already realized that interviews are a poor predictor of job performance and replaced interviews with job auditions. In her LinkedIn article “Job Auditions Are the Hot New Way to Assess Potential Hire”, Samantha McLaren described job auditions perfectly:
“They help companies understand how candidates will actually perform in the role and help them measure candidates’ skills and traits in scenarios relevant to the job they’ll be doing.”Samantha McLaren
Interviews should only comprise a small part of the candidate selection process. In fact, in a properly designed recruitment process, traditional interviews only need to play a minor role. Interviews are a useful tool to build rapport and even start a relationship with candidates after their skills have been validated.
They can, and should, also be used to answer unanswered questions from the hiring process. If you have the results of their assessment prior to the interview, you can concentrate on the skill areas they didn’t perform well in.
How the recruiting process improves top HR metrics
Clearly, making improvements to your recruiting process can lead to better HR metrics – improved employee retention, engagement, and performance. These are the metrics you should measure to make sure changes to your recruiting process are having maximum impact.
Employee turnover is a measure of how many employees leave the organization in a given time period. Calculate your turnover starting with the number of employees you employed at the start of the period (A) and the number of terminations during that same period (B). B ÷ A × 100 = Turnover Rate.
Turnover rates vary by industry, but a 2016 study found that the average turnover rate for all industries is just over 17%. Turnover is inevitable: people leave jobs for all kinds of reasons. However, a high turnover rate is a bad sign that your recruitment process isn’t working.
First-year attrition rate
Another way of expressing employee turnover on a more granular level, first-year attrition rate measures the number of hired candidates who leave in their first year of work. This is then broken down further into “managed” and “unmanaged” attrition – managed indicating when a contract is terminated by the employer. Unmanaged first-year attrition is a good indicator that the new hire has not been set up for success.
Time to productivity
Time to productivity, sometimes called Optimum Productivity Level, is a measurement of how long it takes a new hire to get up to speed – the learning curve in a new role. It’s expressed as the number of days between day one on the job and when an employee fully contributes to the organization. By one estimate, the average time to productivity for a new employee is 28 weeks.
Engagement measures the strength of the connection an employee feels with their job.
“Engaged employees are those who work with passion and feel a profound connection to their company. They drive innovation and move the organization forward.”– Gallup
Engaged employees are a good indicator that your recruiting process is matching the right candidate to the open position. There are a few ways to measure employee engagement. You could send out an engagement survey that asks questions such as:
- How do you feel valued as an employee?
- How satisfied are you with your work/ life balance?
- How do you feel about your career prospects?
Employees would score their answers on a positive/negative scale, giving your HR team a clear snapshot of where engagement stands. Negative scores show that employees aren’t engaged with their work.
Alternatively, other KPIs like absenteeism or poor work efficiency metrics can indicate that you have an engagement issue.
Integrating skill testing and predictive analytics into your recruitment process leads to better business results. The immediate economic benefit of better hires compounds over time. Any business leader knows that the right people are the key ingredient to long-term success. It’s vital that you do everything you can to bring the right people and give them the tools to innovate and grow.