So it was 1999 and much like the great man said I was partying like it was. Actually I wasn’t, I was hiring sales people for Nortel Networks across EMEA. At the time I thought I was pretty good at it. That was until I asked for a secondment into sales, partly because I wanted to earn more money but mainly because I was interested in two things:
Could someone who has never sold telecoms product do it, and how long would it take to do it well
I had never had an internal perspective on a commercial function.
The answer to No.1 was that it was dead easy. I had been selling all my life in recruitment – and selling the most unreliable and untrustworthy product you could probably have – people. Unlike a telecoms switch, people walk, talk and think for themselves. My years of having to influence, cajole and address the frailties of human nature meant selling a product you could demonstrate and finance was relatively easy.
No.2 had huge ramifications for me, and subsequently the likes of Vodafone, RSA, LexisNexis, Yell and O2, just some of the companies we now work with.
The sales organisation basically splits in to 3:
Firstly, a very thin layer of employees that the organisation “leant” on; they smashed their numbers every month and carried a highly disproportionate amount of the burden. Another identifying trait was that in a lot of instances they would have done this without the accompanying huge cheques – it just seemed to be who they were at work. Seth Godin describes these people as “linchpins”. They are the people who you are thinking about right now, the “go-to guys”.
Secondly, there was a layer of those who are “present” or exhibit “presenteesm”. They turn up, just about do enough and go home. Discretionary effort is minimal. They are not adding a huge amount of value but frankly nor are they destroying it, as one CEO once said to me, “they just net out neutral”. Nice.
Thirdly, there was a layer that should never exist, but for reasons that can only be explained via the complexities of human nature always do – the “mood hoovers”. Those people who net out negative. If you had a performance management culture they wouldn’t exist.
So my obsession for the last 12 years has been, how do you prevent this situation?
Given my background, I started to figure out what could we do about the problem in resourcing. I wanted to know if there was a way we could predict which layer someone will end up in – and make a conscious decision on who we hire, rather than find out what we have in six months when it’s too late.
I also focused on the commercial cost of getting it so wrong.
Let’s deal with the second point first. The CIPD state that the cost of miss-hiring is something like 4x base salary. Brad Smart in his book ‘Topgrading’ states it’s more like 14x base salary. Given Brad’s selling something and the CIPD are always conservative, we can safely assume it’s somewhere between the two figures. Think about that for a second, a £100,000 hire could cost anywhere between £400,000 or £1,400,000 if you get it wrong and 10 £40,000 hires could cost you, well, 4 times that!
Staggering numbers – and ratified by my own work at Nortel Networks, we calculated that when factored in to my budget the cost of miss-hires meant that I would need a budget increase of 650%!
So how do you prevent it? Well, we started with some work done by the British Psychological Society on hiring methodology and the accuracy of the methodology in forecasting future performance. What it showed was that a CV-based interview was at best 25% accurate in predicting a new hire’s future performance. We built on this work to show that this accuracy could be increased to a theoretical 75%, and then proved a figure of 86.5%.
You need to start with the notion that previous experience is the least reliable predictor of future performance. That’s it, I said it. The fundamental basis for all recruitment in the UK is without doubt flawed.
“I have done it before therefore I will do it again in a new organisation and role” is just not true. Knowing what to do and doing it are two entirely separate things. Knowledge is not behaviour.
So therefore if we believe previous experience is the least reliable predictor of future success, what is? Chemistry have uncovered the most reliable predictors and even more than that can measure them for any given company and role. The fact is, any company can ensure that they populate their organisation with the right people for them.
I might be stupid, but I’m no idiot! Truths about hiring on intellect
So I talked about previous experience being the least reliable predictor of future performance and how this is costing UK businesses billions of pounds every year. I also might have mentioned that there are some more reliable predictors, in fact, for us, there are four more. In the graphic below you’ll see our ‘5 Block Model’ of People. All of us – you, me and even Jeremy Kyle – can be mapped in to this 5 block model. We all have a certain Intellect, we all hold different Values dear to us, we are Motivated by some things, we behave in certain a way and so forth.
Interestingly, an organisation can be mapped in to the same 5 blocks, as can roles within that organisation. Map the Organisation, role and person and voila – you can start predicting performance far better than you do today.
Why are the blocks stacked this way, you may ask? Well, let’s be clear, it is not in order of importance.
It goes from “hard to change” at the top to “easy to change” at the bottom. This is an important point, because most organisations measure the easy to change stuff, which is odd in itself because the hard to change stuff will have far more impact on an individual’s performance.
So let’s have a look in more detail at Intellect. What’s that all about?
This is the definition of Intellect we use: “It is the speed at which you take in, retain and process information”. Simple as that. It is NOT academic ability, your IQ or the fact that your head is slightly bigger than your colleague. Depending on the organisation and role, a different level of Intellect is needed, therefore hiring the smartest person is not always the smartest thing to do. In addition, if Intellect is not a Predictor of Success, what’s the point in measuring it?
Let me be clear Intellect is only important, if it is; if it’s not, it’s not.
There are a few general rules about Intellect:
1. As ambiguity and complexity increases, the requirement for Intellectual Horsepower increases.
2. In the time you work with an individual you are not going to improve their Intellect. This last statement, whilst true, is highly controversial. You will see a lot of emerging thought and research on the brain and its elasticity, how it shifts its structure based on its environment, stimulus etc. I do not doubt any of this research and I voraciously read it all. My point still stands – in the time you have
with the individual, you will not impact their Intellect, it’s just about timing, not the fact it doesn’t change.
3. Intellect is the only psychometric measurement with which you can reject a candidate, be careful which tool you use.
So what does this mean for accurate hiring? It means:
- Be clear if Intellect is important for the role you are hiring: For example, for one client, we measured Intellect in 100 of their top performing sales people as well as in 100 of their bottom performing sales people (please, no silly comments about why they had 100 bottom performing sales people) and found no statistical difference in Intellect between the two groups. This was because the sales process was simple. Regardless of Intellect, it was doable, so we didn’t recommend it was measured in the recruitment process.
- Choose your tool carefully: Intellect is measured using Verbal and Numerical Reasoning tools; there are a dozens of tools that do this. You need to select a tool that has validity within the community of people you are hiring and ideally the right norm groups. If you are hiring at a senior level a good tool to use is Watson & Glazer/RANRA; it is reliable and includes manager and senior business leader norm groups. However, it takes 90 minutes to complete so whilst robust as a candidate experience, it may be not ideal. However, be careful with some of the shorter tests; Wonderlic at 8 minutes, is interesting but very short; frankly, we think too short. SHL has a suite of Intellect tools; we don’t use them if we can help it, but we know a lot of clients that do. A tool called Saville’s Aptitude provides a nice balance between a good level of assessment and, at 18 minutes long, is not an overly arduous candidate experience.
However, when selecting all our psychometric tools, we select them based on the best tool for measuring what we need; we suggest you take the same approach.
Authored for Working Lives by Roger Philby
CEO and founder, The Chemistry Group