Employers gambling when it comes to hiring: survey

A quarter of new hires are underperforming.
By Laura Cassiani
|Canadian HR Reporter|Last Updated: 03/16/2001

Employers who use traditional hiring methods are taking a gamble when they hire: nearly one-quarter of the people they hire will fail, suggests a new survey.

Research from the Richard Ivey School of Business in London, Ont. shows that most firms continue to use informal interviews and resumes to hire for all types of positions — methods that don’t predicate or identify high performance employees — and so they aren’t always getting the right person for the job.

The survey of 141 firms suggests that by using traditional methods to select people companies are really leaving hiring the right person for the job to chance.

“This is very unfortunate because with a little forethought and research, any organization could increase the overall quality of its people by 30 to 50 per cent,” says John H. Eggers, associate professor at the Richard Ivey School of Business and co-author of the study.

Eggers says that 75 per cent of people who are hired using traditional methods will be satisfactory performers or a little better and the remainder will be fired within the first three months to a year.

“Technically, similar results could be achieved by flipping a coin or using a horoscope,” said Eggers.

The interview is still the most common tool for selecting senior employees used by the majority of large Canadian companies surveyed.

Time-strapped managers are also leaving hiring decisions to instinct. Only a minority of employers are using more sophisticated selection methods, like executive search firms, when hiring for senior positions.

Selection has taken a back seat to recruitment and it’s come at a great expense to firms, says Eggers.

But, good selection begins with good recruitment and employers should be honest with candidates starting with the way the job posting is written.

A realistic job preview should include all aspects of the job — good and bad. Eggers says employers should be honest about working conditions and compensation from the start.

At an Intel chip-factory in Malaysia, the job posting warned applicants of the dim working conditions in the factory and the monotonous nature of the job; but it also described the advantages, like working for a financially successful and recognized firm and competitive pay. That, combined with using ability testing, helped lower turnover by 25 per cent, says Eggers.

“When you give people both sides then you get people who know what to expect and won’t be surprised. They think it scares good people away but frankly, it does the opposite,” says Eggers.

The good news is that there is a growing trend towards a more rigorous approach to selection. Ten to 18 per cent of companies said they are using performance appraisals and peer reviews to strengthen selection processes.

Use of ability testing, one of the best ways employers have at predicting the future performance of a candidate, is also on the rise.

Eggers says an effective selection method should focus on what the job really is, getting relevant information from a candidate and rational and fair decision-making in the hiring process.

“These methods can add considerable predictive power when the information is combined with structured interviews as part of a selection battery,” says Eggers.

But employers are still reluctant to invest the time when it comes to hiring.

“But you either pay now or pay later and it costs more if you pay later,” says Eggers.

Hiring with

your ‘gut’

While the survey examined innovative selection practices, it revealed most hiring decisions are still based on the following three practices:

•The “warm body” approach — in a panic employers hire anyone who looks good at the time;

•The “rituals” approach — traditional methods will suffice, regardless of rational evidence that suggests there are better approaches; and

•The “gut feeling” approach — managers knowing their business use their intuition to make hiring decisions.

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