The Biggest Mistakes Companies Make With Hiring:

The most highly qualified and enthusiastic candidates too often get ignored

Photograph: Jon Krause

By Peter Cappelli, Wall Street Journal
February 21, 2019

Companies often say people are their most important asset. But, for many, you’d never know it by the way they actually go about hiring those people.

Consider: Highly qualified and motivated job candidates are ignored while companies focus on recruiting less enthusiastic ones. Lengthy, multilayered hiring processes leave vacancies open far longer than necessary and alienate job candidates.

And often no one has a clue whether the hiring process is working – whether the company is finding the best person for the job.

Instead, companies’ hiring policies seem driven by one attribute: expense. This is one of the worst examples of penny-wise and pound-foolish thinking in modern business. The costs actually are substantial, as unfilled positions drag down results and employees in the short term, and long-term corporate performance suffers when a business fails to hire the most qualified candidates.

Fortunately, any company can avoid these pitfalls and hire more wisely. If, that is, they know the common mistakes to watch for.

Does your hiring process even work? Most companies haven’t a clue.

According to research firm Gartner Inc., just under one-quarter of large employers currently track whether or not their hiring process is resulting in good employees.

What many employers do measure and track obsessively are costs per hire and time to hire. Think about that for a minute: It would be like a marketing department telling you how much an advertising campaign cost and how quickly they put it together, without telling you whether it had any effect on sales.

Many companies say it’s hard to measure the quality of hires after the fact. But plenty of companies have found a way to do something—they at least look to see whether those who scored better in assessments made during the hiring process are less likely to quit, or more likely to get promoted or get better performance appraisals. Any effort along these lines is better than nothing.

Of course, that sort of evaluation requires companies to make objective assessments of job candidates in the first place, something that many don’t do. Only 48% of companies surveyed in 2017 by human-resources consulting, training and research firm ERC said they tested to see if candidates had the skills, job knowledge or abilities to do the work they were seeking.

What’s more, such testing doesn’t do a company any good if its hiring managers don’t act on that information. One study found that human-resources managers who most often go against the results of employment tests and instead rely on their own judgment tend to get worse employees than those who rely more on tests, according to a 2018 article in the Quarterly Journal of Economics by Mitchell Hoffman of the University of Toronto’s Rotman School of Management; Lisa B. Kahn, now at the University of Rochester; and Danielle Li of the Massachusetts Institute of Technology.

So many internal candidates. But companies ignore them.

Even more stunning is where employers aren’t even looking for job candidates—from within. By some estimates, only about a third of vacancies on average are filled by promotions, transfers or other internal moves.

It’s easy to see how that happens. Only 28% of talent-acquisition leaders report that internal candidates are an important source for filling their vacancies, according to a 2016 LinkedIn survey. And fewer than one-third of employers require that managers post jobs internally before hiring from the outside, ERC found in its 2017 survey.

This is despite evidence suggesting that internal candidates are better and cheaper performers, according to a study by Wharton School associate professor Matthew Bidwell published in 2011 in the Administrative Science Quarterly.

In addition, filling openings from within, especially by promotion, signals to a company’s employees that there is opportunity for advancement, which is an important factor in retention.

Companies want too many candidates who don’t necessarily want them.

One of the strangest developments in companies’ efforts to recruit outsiders is the current fixation on so-called passive candidates—those who aren’t looking to move.

The idea behind this is the smart-sounding notion that there might be something wrong with anyone who wants to leave his or her current job. But consider the results of a 2014 LinkedIn survey. It found that the No. 1 factor that would encourage passive candidates to move was paying them more money, while for those actively seeking new jobs the greatest motivation was better work and career opportunities. Active job seekers also reported being more career-focused and more engaged in seeking information that would help them improve their job performance, and a majority said they were satisfied with their current job. They seemed interested in moving because they were more ambitious, not because they were struggling.

Yet “recruiting passive talent” beat out “recruiting highly skilled talent” as a priority for recruiters who responded to a 2015 LinkedIn survey.

The process itself guarantees inefficiency.

A final problem with hiring lies with its administrative processes.

The ability to submit applications electronically very soon overwhelmed employers with submissions, and companies responded with software that screens applications cheaply and quickly—and in many cases, too aggressively. A combination of stringent requirements for any application to avoid electronic rejection and many companies’ muted interest in people actively seeking jobs has turned these systems into black holes for applicants.

Meanwhile, the time it takes companies to fill job openings has been going up for more than a decade. While some economists have been inclined to see that as a sign of labor-market tightness, a simpler explanation confirmed by surveys of employers is that more steps have been added to the selection process: more rounds of interviews, drug and background tests, and a general inefficiency in securing permission to hire from financial controllers interested in keeping staffing lean. A study by Indeed.com in 2015 found that job candidates are put off by having to clear too many hurdles: The number of people applying for jobs fell 50% when online applications had more than 30 questions. Even once offers are extended, candidates report that delays in the process are an important factor in determining whether they will accept them, according to a 2012 survey by recruiting firm Robert Walters .

One way around these administrative delays is the common practice of outsourcing all or part of the hiring process to experts. Unfortunately, producing better-quality hires isn’t the top demand that clients make of their outsourcing vendors, according to a 2014 survey by the Futurestep unit of consulting firm Korn Ferry and the magazine HRO Today. Their concern is more focused on time delays and cutting costs.

Dr. Cappelli is the George W. Taylor professor of management at the Wharton School and director of Wharton’s Center for Human Resources.