Hiring Is About Risk Assessment, Not Resumes

What if you thought about hiring the same way you think about car insurance? Think about how the car insurance process works: The agent doesn’t need to meet you in person to know that if you have a sports car in the garage, four accidents on your driving record, and a 16-year-old living under your roof, you are probably going to cost them money at some point. They have become adept at using historical data to predict the likelihood of certain outcomes, such as you getting into an accident and filing a claim. The riskier you are, the more expensive your policy will be. It’s a formula that’s been proven over time.

But could you imagine if the insurance underwriter forgot to ask what kind of car you drove when pricing your policy? Or worse, they didn’t bother to check your accident history or discover that you have a teenage driver at home? All those things are crucially important to assessing the risk of a new customer. The insurer’s risk evaluation processes are designed to uncover these bits of information; it is not by chance that these organizations are good at predicting outcomes.

Business managers can use the same math that insurers and banks use to determine risk levels and expected outcomes and make better hiring decisions. It’s all about identifying and scoring the factors that tell you whether there is a higher or lower likelihood that a candidate will be successful in the job. So why do you overlook these key risk factors when making your hiring decisions?

When you rewire your thinking along these lines, you will recognize that the way you’ve always approached the recruiting and hiring process for your organization is probably not effective at determining which candidate has the best chance of succeeding. If you want to change the quality of people you hire, you need to start by changing what you measure in the selection process. You also need to rethink from where your next hire may come.

Did you know that fifty percent of the factors that predict a person’s success or failure in a role have nothing to do with their industry experience? In other words, your next great hire is likely to have no prior experience in whatever business or industry you operate.

Clearly, this likelihood has multiple implications for how you go about identifying people to fill your open positions. It also means you can open up ample opportunities to find talent for your organization that your competition may have overlooked. Think of searching for your new hire like author Michael Lewis described the Oakland Athletics’ player scouting and recruiting process in his best-selling book Moneyball: The Art of Winning an Unfair Game. The book showed how Billy Beane, the general manager of the Athletics, was using a different lens to evaluate players who were overlooked by other clubs.

Working for a team with a limited budget, Beane couldn’t just go out and sign every high-priced free agent (or even keep many of his own high-priced players). He needed an edge—something that would help him identify players he could afford who were also able to perform on the field. Unlike traditional scouts, who valued whether a player “looked like a major leaguer,” Beane and his team of Ivy League–educated assistants dug into statistics such as on-base percentage to find players who may not look the part but could perform. His now-famous results have become something of baseball legend; he crafted the Athletics into one of the most cost-effective teams in baseball. For example, in the 2006 Major League Baseball season, the Athletics ranked twenty-fourth of thirty major league teams in player salaries but had the fifth-best regular-season record.

So how do you go about identifying high-potential team members for your organization?  Our research shows that there are four key elements that, when present, lead to a higher likelihood of success in any professional position:

1. Attitude

In the Super Elements, attitude is defined as a person’s disposition toward work. If your candidate has a positive disposition toward the act of working, then they have a “positive attitude.” Research shows that outside of an intermittent “case of the Mondays,” a person’s satisfaction with their job stays relatively stable over time –

including when they change jobs or companies. This evidence implies that there is something innate in a person that predisposes them to report a positive (or negative) attitude toward their work.

2. Sense of Accountability

The extent to which a person believes they have control over their own outcomes is what industrial psychologists call their locus of control. When good or bad things happen, does the person take accountability for their actions and for their contribution to that result? In psychology parlance, there are two loci – an internal locus of control and an external locus of control.

Research tells us that people with an internal locus of control tend to perform better at their jobs across all roles. Specifically, people who feel they have direct control over their environment perform significantly better than those who attribute personal outcomes to external factors such as other individuals, luck, or fate.  People with an internal locus of control will attribute the events that happen in their job – both good and bad – to their own actions or decisions, whereas people with an external locus of control will tend to make excuses.

3. Prior Related Job Success

A candidate has past related-job success if they have met formal goals in past jobs that are similar to the goals of the job for which they are applying. If the context of the person’s past job – activities, goals, and environment – closely matches the context of the job for which you are hiring them, a candidate who met or exceeded their goals in the past job is likely to meet or achieve similar goals in the future.

4. Cultural Fit

Cultural fit is the degree to which the job applicant shares similar values with the organization and demonstrates an authentic interest in the job at hand. When you are looking for new talent, it’s important to screen candidates to see if the values that motivate them, the how of what they do, are a match for you and the company.  It is also worth understanding where the person stands in their job search and, if the job was offered to them, whether they would actually take it. Or, if they did take the job, would it be as a placeholder and a paycheck while they keep looking for that perfect gig? Knowing the answer to this question can save you a lot of time and aggravation.

Take a lesson from Billy Beane, and focus on the factors that predict success in the position you are trying to fill.  By implementing a systematic, risk-based approach to your company’s hiring process, you will produce more predictable and consistent hiring outcomes.

[Image courtesy: Tumisu/Pixabay]

About the Author

Adam Robinson is founder and CEO of Hireology, where he is on a mission to help business owners make better hiring decisions using predictive data and technology, and author of THE BEST TEAM WINS: Build Your Business Through Predictive Hiring. For more information, please visit www.Hireology.com or www.TheBestTeamWins.com.