The Science of Performance-Based Hiring and 5 Organizations Using It

Shiran Danoch | I/O Psychologist

November 28, 2018

Most companies today are already using assessments within their recruiting process. In fact, it’s estimated that more than 80% of Fortune 500 companies in the US use some type of psychometric assessment tool on candidates during the hiring process.  

While those assessments are validated occasionally, they’re not usually adjusted to account for ongoing changes. So in practice, organizations are using the same assessment for years on end, although trends, circumstances, key performance indicators (KPIs) and desired employee profiles have significantly changed.

For this reason, more HR leaders are turning to a practice called performance-based hiring. This is a data-driven hiring strategy that compares actual performance data to candidate data - like assessments and interview scores - to determine what constitutes a successful hire. Designed to identify patterns in the data, this method allows organizations to continuously learn and adjust their selection process based on their findings. Professionals in the psychometrics field refer to it as validation or predictive validity of the hiring process.

The Science of Performance-Based Hiring

Unlike conventional hiring methods, performance-based hiring takes a scientific approach to identifying top talent. And a critical piece to this scientific approach is validation. Validation studies are scientific experiments conducted to prove how accurately pre-employment assessment scores predict job performance outcomes. This allows HR leaders to make better hiring decisions by ensuring candidates meet or exceed a validated standard on the pre-hire assessments. And your selection process is valid only if it helps you increase the chances of hiring the right person for the job.

For example, maybe you assumed that a high score in critical reasoning is a good indicator of success. However, after conducting a validation study, you discovered that the skill doesn’t actually predict future success. In fact, you may even have identified a strong relationship between empathy and employee performance. You now know that you need to place more emphasis on empathy assessment, and give this trait more weight in your final decision compared to less predictive traits.

This type of data helps to optimize your hiring process and better identify quality hires during this phase. Conversely, if you’re not learning from your performance data, you risk committing to a process that yields bad hires, which can mean high costs for your organization.

That’s why performance-based hiring is considered the “secret sauce” to finding the top employees. And there are a few organizations that have tapped into this scientific approach to validate their selections, and in turn, boost productivity, decrease turnover and support key business objectives.

5 Organizations Using Validation to Improve Their Selection Process
1. U.S. Army

The U.S. Army has traditionally used personality and talent assessments to predict an individual’s success in a particular military career or path. A recent example is the use of the Dispositional Resilience Scale (DRS) to assess US Army Special Forces candidates for psychological hardiness. The organization conducted a validation study to find that this characteristic was associated with stress tolerance and successful performance in highly demanding occupations, such as “Special Forces.” As a result, scores from the DRS were used to accurately predict successful completion of the course.

Furthermore, the organization has relied on the U.S. Army Research Institute for the Behavioral & Social Sciences (ARI) since 1940 to maximize individual and unit performance and readiness. The research lab employs behavioral psychologists to conduct ongoing research and validation studies, and the Army uses their findings to improve the entire life cycle of recruiting, selection, assignment, training and mission performance. Through its research and data analysis, ARI has significantly improved the Army's capability to recruit, develop and retain capable and ready soldiers and leaders.

2. Google

With one of the world’s first data-driven HR functions, Google is another organization committed to constantly evaluating and adjusting every stage of its hiring process. In his amazing book “Work Rules!”, Laszlo Bock, Google’s former VP of  people operations describes several ways in which google validates their hiring process. One way is through their Revisit Program. This allows them to revisit the applications of rejected candidates to assess and identify any errors, and then to correct them and learn from them.

The process begins by feeding the resumes of current employees for a particular job into an algorithm that identifies common keywords. The team typically adds or removes keywords based on their findings, and the updated list of keywords is ran through another algorithm. This time they assess the past six months of applicants, and assign a weighting for each keyword based on how frequently it occurs on successful and unsuccessful resumes. Finally, they score the next six months of incoming resumes against these weighted keywords to identify those with high scores as top candidates.

But Google doesn’t stop at the candidate side of hiring. They also test and assess interviewers’ ability to predict whether someone should be hired. Every interviewer sees a record of the interview scores they’ve given in the past, and whether those people were hired or rejected. This helps to determine if they are correctly assessing potential employees, and it allows later reviewers to know whether a particular interviewer is reliable or should be ignored. Furthermore, each interviewer is measured against the 86% accuracy from average interview scores, and then categorized into groups based on their individual accuracy.

3. National Football League (NFL)

Even the NFL considers performance-based hiring a winning strategy. Various NFL teams use an assessment test called the Athletic Intelligence Quotient (AIS) to predict the success of a football recruit, according to a recent article on cnbc.com. The AIQ hones in on the intellectual abilities most used in attaining, enhancing, and applying athletic skills, and the scores are factored into draft picks on NFL Draft Day. The AIQ helps organizations like the NFL validate their selection process in the following ways:

And since 2012, several teams have been able to leverage six years’ worth of data to make key findings that result in better picks.

4. College Board

Performance-based hiring can also help colleges and universities predict the success of their applicants. In fact, the College Board continually collects validity evidence to evaluate the relationship between their assessment scores and college success. In a more recent example, the organization conducted a predictive validity study to determine the correlation between the redesigned SAT scores and college performance after it was updated due to accusations of being biased and disconnected from high school curricula. The goal was to use the data to assess the ability of the new version to predict the success of first-year college students.

To gain insight into the validity of their approach, the College Board Research and Psychometrics teams conduct ongoing research in the areas of academic preparation, career readiness, college access, admissions, affordability, collegiate outcomes, and education policy. Their work spans a wide range of disciplines - including behavioral science, education, economics, psychology, public policy, and sociology - and they leverage cutting edge methodologies and data to support the organization’s mission to connect students to college success and opportunity.

The organization even offers an Admitted Class Evaluation Service™ (ACES) for colleges and universities. The free service helps these institutions conduct customized studies to validate their admission and placement policies, as well as answer key questions about the College Board assessments they use at their institution.

5. Ernst & Young (EY)

EY, one of the largest professional services organizations in the world, dropped academic qualifications for its U.K. hires after testing the predictive validity of its student selection process. The organization conducted an 18-month analysis to determine whether its strengths based approach was a reliable indicator of a candidate’s potential to succeed. The findings revealed positive correlations between certain strengths and success in a particular role; hence, the decision to focus on strengths assessments rather than academic requirements. And while academic qualifications continue to be valued, there’s no evidence that shows previous success in higher education correlates with future job success.

Getting Started with Performance-Based Hiring

The validation process is key to making discoveries that have helped these organizations and others optimize their hiring process. Here are three steps to begin incorporating performance-based hiring into your organization to find similar success:

  1. Quantify your hiring process. Be sure to score and measure each stage of the process. This includes online assessments, but also interviews, professional tasks and other components of the recruiting process. You can't improve what you don't measure.
  2. Quantify job performance. Although most companies have numeric performance metrics (i.e. manager evaluations), they are usually subjective and unreliable. Adhere to a few objective or semi-objective measures of performance, such as quotas, organizational social network analysis and retention.
  3. Keep data organized. Manage both sets of information in platforms that you can easily access and utilize for analysis and validation needs, like ATS and performance management platforms. If you are a small organization, even methodical, well-organized Excel files will suffice.

Take these steps today to begin validating your selections through performance-based hiring. Like the organizations we discussed earlier, you’ll have the evidence you need to create and maintain selection processes that fit your hiring needs and keep up with the pace of the ever-changing world of work.