Challenges in the Hiring Process
It has been estimated that above-average employees are worth about 40 percent of their salary more to the organization than average employees.6 Thus, an above-average new hire in a sales job with a $50,000 salary would be worth $20,000 more to the organization than an average employee hired for the same position. Over 10 years, the above-average employee’s added value to the company would total $200,000! If this estimate of added value is multiplied across, for example, 10, 20, or 50 hires, it is easy to see that the monetary value of making above-average hires can total millions of dollars.
Poor hiring decisions are likely to cause problems from day one.7 Unqualified or unmotivated workers will probably require closer supervision and direction. It has been estimated that managers spend 12 percent of their time managing poor performers,8 time and energy that could be applied to more productive areas if the poor performers had not been hired. Workers who were hired with inadequate skills or experience may require additional training yet may never reach the required level of performance. They may also give customers inaccurate information or give customers a reason to do business with competitors. Poor hiring decisions can also lead to employee turnover.
Just how costly is employee turnover? A basic estimate is that turnover costs approximately 25 percent of the annual salary and benefits of the employee who is leaving.9 An examination of turnover costs for park and recreation agencies found that the costs associated with the turnover of a recreation staff member (such as a supervisor or program manager) ranged from $4,208 to $14,464. The turnover costs for operations/support services employees (such as a janitor, an office manager, or a receptionist) ranged from $2,647 to $23,142 per employee. As the level and salary of a worker goes up, so does the turnover cost. The cost to hire another physician for a medical center was found to be $36,743.00, but that cost does not include costs of lost productivity and training costs.10
The following list describes the major categories of turnover costs, which can add up to a significant sum.11 Some may be difficult to estimate, but they are real costs just the same. For example, what is the cost of a disruption to peers and to the work process when someone quits? How much productivity was lost before the worker decided to quit?
Major Turnover Costs12
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Separation Exit interview, paperwork processing
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Recruitment Advertising, recruiter fees
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Selection Pre-employment testing, interviewing
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Hiring Orientation, training
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Productivity Vacancy cost, disruption
Getting and keeping the best not only makes sense in terms of treatment of employees as customers of the management process, but also makes economic sense.
It is essential that line managers, and possibly other line workers, be involved in the hiring process. Although the HR department has an active role to play in recruiting, selecting, and socializing new employees, line personnel will actively be supervising the new hires, and these managers often have job-related insights that members of the HR department may lack.
The hiring process is fraught with challenges. The most important of these are:
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▪ Determining which personal characteristics are most important to performance.
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▪ Measuring those characteristics.
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▪ Evaluating applicants’ motivation levels.
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▪ Deciding who should make the selection decision.
We’ll look at each of these next.
Determining Characteristics Important to Performance
For several reasons, the characteristics a person needs to perform a job effectively are not necessarily obvious. First, the job itself is very often a moving target. For instance, the knowledge, skills, and abilities (KSAs) —see Chapter 2) necessary for a good computer programmer right now are certainly going to change as hardware and software continue to evolve. Second, the organization’s culture may need to be taken into account. What kind of place is the organization, and will the worker fit in? The issue of fit can be as important to job performance and employee retention as is the ability to perform the tasks.
Third, different people in the organization often want different characteristics in a new hire. Upper-level managers may want the new manager of an engineering group to be financially astute, whereas the engineers in the group may want a manager with technical expertise.
Measuring Characteristics That Determine Performance
Suppose mathematical ability is considered critical for job performance. You cannot infer from looking at someone what level of mathematical ability he or she possesses. Rather, you must administer some test of mathematical ability. Some tests are better than others at predicting job performance, and they can vary widely in cost.
The Motivation Factor
Most of the measures used in hiring decisions focus on ability rather than motivation. There are countless tests of mathematical ability, verbal ability, and mechanical ability. But, as the following equation makes clear, motivation is also critical to performance:
Performance = Ability × Motivation
This equation shows that a high ability level can yield poor job performance if it is combined with low motivation. Likewise, a high level of motivation cannot offset a lack of ability. (We will discuss another influence on performance, system factors, in Chapter 7.) The performance equation makes conceptual sense, and recent empirical work supports the importance of both ability and motivation in determining performance. For instance, the early career success of M.B.A. graduates has been found to be a function of both ability and motivation levels.13
Unfortunately, motivation is very difficult to measure. Many employers try to assess motivation during the employment interview, but (as we will see later in this chapter) there are numerous problems with this method. As a manager, you can look for evidence of motivation in job applicants. For example, have they engaged in extracurricular activities, perhaps sports or in the arts, while attending college? You can try to determine what led to the person being motivated to engage in the activity or to meet the challenge. If similar conditions exist on the job, there will be a chance that the applicant could be inspired and be a motivated worker.14 However, it is important to recognize that motivation seems to be much more dependent on context than ability is. If you are a typical student, your motivation to work hard in a class depends to a large extent on whether you like the course content, how much you like and respect your instructor, and how grades are determined. Your academic ability is fairly stable from course to course, but your motivation level is much more variable. Work situations are similar to the classroom example: How much you like your job responsibilities, how well you get along with your boss, and how you are compensated all affect your level of effort.
Who Should Make the Decision?
There are two good reasons for letting the HR department run the staffing process. The first (and more important) is that the organization must ensure that its employment practices comply with the legal requirements described in Chapter 3 , and making HR staff responsible for all hiring decisions can help avoid problems in this area. The second reason is convenience. Because the HR staff is usually responsible for processing initial contacts with applicants and is often the repository of information about applicants, many organizations find it easier to let the HR department follow through and make hiring decisions.
However, this system leaves the line personnel out of a process that is critical to the operation’s effectiveness. If an organization decides to involve line employees in hiring decisions, which ones should it consult? The first, and most obvious, are the managers who will be supervising the new hire. The second group consists of the new hire’s coworkers. The third group, where applicable, are the new hire’s subordinates. As we saw in the Espresso Hut example that opened this chapter, these groups do not necessarily share the same view of what characteristics are important in the new employee.