3 Ways to Use Your Company Culture to Improve Hiring
Companies spend over $720 million per year on employee engagement and over $120 billion on talent acquisition because happy employees perform better and are less likely to leave (Bersin Associates). And yet recent data shows that only 13% of employees feel engaged. The few companies that are hiring the right people and solving the engagement problem are experiencing big rewards. Companies with high employee engagement experienced 147% higher EPS than their competition (Gallup, State of the Global Workplace Report 2013). The root cause of employee disengagement is a misfit between the individual and the organization. So how can you improve the fit between your organization and your employees? It starts with hiring well.
Almost every company spends significant time evaluating whether a candidate has the right skills to do a job, but they don’t take the same care evaluating fit. What does it mean to evaluate fit? There are a lot of conflicting views on this, and that’s part of the problem. I’d like to propose that fit means joining a group of people who share your values and priorities. Another way to think about it is this: There are many ways to get from point A to point B, and fit is finding people who want to take the same journey as you.
In an ideal world, we would have unlimited resources and time to evaluate whether a job candidate shares our values and should join our team. But in reality we spend too little time and too much money on this problem, and this is where data and technology can improve your hiring process. Below I’ve outlined the three biggest mistakes that companies make in hiring for fit, and offer three data-driven solutions.
FIT ASSESSMENT HAPPENS TOO LATE IN THE HIRING PROCESS: GATHER FIT DATA AT THE TOP OF THE FUNNEL
Evaluating fit begins too late in the hiring process, often during in-person interviews. Interviewing candidates is expensive. Companies should only interview candidates who have the right values for their organization. Currently, most companies do almost no screening for values before interviews. So they end up wasting resources interviewing candidates that have the right skills, but who don’t share core values with the company.
Our natural assumption is that fit assessment must take place in-person. But in reality you can gather valuable data about a candidate’s values at the top of your applicant funnel. Using this data, you can focus your attention on the candidates that are most likely to succeed in your organization, and you can avoid wasting valuable interviewer time on poor fit candidates. Using a well-structured survey to capture information about a candidate’s values and preferences in the workplace will provide valuable data in a cost-efficient manner. Use this data alongside other early screens for skills and experience to prioritize the strongest candidates.
For example, let’s say you get 100 applications for an open position. By reviewing resumes you narrow down the applicants to 50 people who have the right set of skills and experience, but you need to figure out which 10 to bring in for an interview. Your options are to A) choose randomly, B) define arbitrary cut-offs around resume data like years of experience or college GPA, or C) use an additional predictive data set focused on candidate values. Choice A is obviously sub-optimal, but many employers still use choice B even though research by Google’s people analytics group has shown that these types of cut-offs do not predict employee success (Laszlo Bock Interview). By focusing on fit using culture data, you are increasing the probability that the 10 people you interview are the most likely to succeed at your company, even if no other assessment takes place. Research shows that culture compatibility is predictive of both higher performance and lower turnover in new hires. Charts below illustrate the relationship between culture compatibility, performance, and turnover. Data is from internal Pomello studies and original research from Charles O’Reilly (Stanford University).
FIT ASSESSMENT IS UNSTRUCTURED AND CAN BE BIASED: USE CULTURE FIT DATA TO GUIDE YOUR INTERVIEWS
As we mentioned earlier everyone has a different view of evaluating fit, so it’s not improbable to have multiple opinions about a job applicant. If your team can’t answer the question “what does it mean to fit into our culture?” consistently, then it’s no surprise that we often hire culture misfits. In the absence of a unified and definitive assessment of fit, certain cognitive biases are more likely to enter your process. For example, escalation of commitment or sunk cost fallacy is extremely common post-interview. It happens when we justify a hiring decision based on all the resources we committed to evaluating that individual rather than a true assessment of their potential.
The solution to this second mistake is to educate and arm your interviewers with an understanding of your team culture, and ensure a consistent approach to evaluating fit. The data captured earlier in your hiring process can now be repurposed to drive a rigorous interview approach. Use a shared understanding of your team values to ask the same set of questions of each candidate. Ask open-ended behavioral interview questions, so that candidates can articulate their values to you without trying to game the process. When reviewing interview feedback hold yourself accountable to the values that you and your team have decided are the most important. If a candidate gets consistently negative feedback on an important value, then remember that it will cost you much more to make a bad hire, than the resources you have already spent evaluating them.
COMPANIES DON’T USE THEIR CULTURE TO MAKE THE MOST COMPELLING JOB OFFER: USE YOUR COMPANY CULTURE AND YOUR FIT ANALYSIS TO DIFFERENTIATE YOUR OFFER
The final mistake we’ll look at happens when a company makes a job offer to a candidate. There is a fundamental shift that happens at this stage when hiring manager must shift from evaluation to sales. Hiring has two equally important imperatives: don’t make a bad hire and make sure you get the best talent. The first two mistakes I’ve discussed generally result in the former, whereas this mistake results in losing out on great talent. When you make a job offer to a candidate, you should assume you have tough competition for their talent. And since you’ve been rigorous in your evaluations you should want to experience the return on your investment.
The problem is that most companies make a job offer that consists of a compensation and benefits package and almost nothing else. Since most companies can’t offer above-market compensation, this type of offer opens you up to fierce competition from other undifferentiated offers. You are presenting your employer brand as a commodity. Job seekers in this situation are likely to go with higher compensation offers, and companies with better brand recognition, leaving you with a lower offer acceptance rate than you should have.
The solution is to utilize all the information you have gathered about a candidate to appeal to their intrinsic motivations and not just their extrinsic motivations. Intrinsic motivation is the desire to do something because it provides a sense of accomplishment and underscores the belief that your actions are worthwhile. The inherent values of individuals are the anchor for this type of motivation. Unfortunately, we tend to assume that people are more motivated by extrinsic rewards such as pay, even when we self-report being more motivated by intrinsic rewards. The take-away for hiring managers is to reverse this assumption, and provide context to a job offer by appealing to a candidate’s values and they way they will be appreciated and rewarded within your organization. This will increase your job offer yield rates and ensure that you see the highest return on your investment in your hiring process.