May 6, 2013
By, Frida Polli
Michael Lewis’ Moneyball tells the story of how the Oakland A’s started hiring players based on objective data rather than the subjective beliefs of baseball insiders. This data often defied conventional wisdom. But they revolutionized the game and the A’s beat behemoth teams with 3x the salary line.
Corporate America needs Moneyball for hiring. Evidence that the current system isn’t working abounds. Job vacancies haven’t come down from 2008 levels despite 30% greater unemployment (the Beveridge curve has a tail). Number of interviews and time to hire has doubled. Companies spend 40% or more of revenue on payroll and yet average turnover rates have climbed to 15%. Simple multiplication: 6% of revenue is wasted every year. HR may fear change but I’ve always wondered… why don’t CFOs care?
What is the current system? In Josh Bersin’s words: “The vast majority of hiring… decisions are made on gut feel, personal experience, and corporate belief systems. This is like the vice-president of marketing spending millions of dollars on a new campaign because he or she “always does it this way.”
About 30% of corporate America tries to collect data using questionnaires. Sounds good but let’s take a closer look. Let’s imagine a doctor trying to objectively determine your weight. Instead of weighing you, the doctor simply asks you your weight and takes that as fact. That’s like considering subjective answers to questionnaires the same as objective data.
Not only are questionnaires unreliable but they’re old! The Myers-Briggs is nearing its 75th birthday. Imagine companies trying to exist in today’s information age with 1940’s rotary phones, switchboard operators and typewriters. That’s how outdated questionnaires are compared to the alternatives.
What are the alternatives? The main alternative is objective data, either in the form of biodata or performance data. Biodata is any data that can be observed or collected about a person in a non-obtrusive way. Evolv, a HR big data company, found interesting correlations between browser downloads and job performance. The doctor / weight equivalent would be using your pant size to determine your weight. And finally there is performance data, where you actually examine someone’s cognitive and personality traits using objective measures. The doctor / weight analogy: she breaks out the scale.