Recruiting in Tomorrow’s Economy: Point/Counterpoint

Charles W. Coker, Ph. D. & Dr. Ira Wolfe

Coker: Ira, several years ago Peter Drucker made the following statement:

"The ability to make good decisions regarding people represents one of the last reliable sources of competitive advantage, since very few organizations are good at it."

I think he knows what he’s talking about. I don’t believe good people will ever be that hard to find, since so many organizations are inept at caring for them. Companies will always downsize and there will always be a group of experienced people ready to go to work. Besides, the economy will cool down sooner or later.

Wolfe: Chuck, I disagree. Unemployment has hit a thirty-year low and the economy is hot. The present labor problem will not go away when the economy slows down, this time. Consider this. The 1970’s oil shortage was caused by only five-percent shrinkage and was a deliberate act to withhold resources for political and economic reasons. The current and projected labor shortage is fifteen to twenty-five percent. No one is hiding employees. Nearly all the people who can work, are working. The labor crunch is on and from all indications will continue well into the next twenty years.

Coker: How can that be? In 1998 nearly 350, 000 jobs were cut in manufacturing alone all across America. Productivity has improved across the board in almost every industry. We’re working smarter as a nation than we ever have. Our knowledge information base is doubling at a phenomenal rate and we’re acquiring more valuable tools to insure that the workforce is the best it’s ever been.

Wolfe: Yes that’s true. Except that in1998 nearly three million new positions were created in the U.S. economy. And in the first four months of 1999, nearly 700,000 new jobs were created. That leaves between three and six million unfilled positions in the United States. "Help wanted" signs are prevalent everywhere I go.

Coker: I think you’re becoming an alarmist. Remember the futurists who prophesied in the sixties that the world would not be able to produce enough food to feed all the people? Since that time food production has increased threefold, while population has only doubled. We’ve met the world’s needs for food. The problem is in distribution, not in food production. There will always be people available to fill jobs. Just look at the new influx of people coming from Kosovo. Surely they will fill some of the empty slots.

Wolfe: I agree, they will fill some positions. Just not enough. The labor force has grown nearly 40% during the past twenty years. The number of positions available has increased 50%. According to the Hudson Institute, the ratio of entry level wage earners to retirees has fallen from 9 to 1 in 1955; 4 to 1 in 1995; and will be 2 to 1 by 2020. Where we previously had 9 entry-level wage earners to each retiree in 1955, it is predicted that we’ll have only 2 entry level wage earners to each retiree by the year 2020. The problem is so bad that companies have resorted to "warm-body" hiring. The American Management Association reports that nearly 36% of job applicants in 1998 for entry-level jobs lacked even basic skills, like reading and math. Many were hired anyway.

Coker: It sounds like you’re telling me that the real problem is in finding qualified employees for semi-skilled and skilled positions.

Wolfe: We finally agree on something. In 1973, blue-collar workers represented over sixty percent of the workforce with mostly unskilled laborers. By year 2000, only ten percent of the workforce will be blue collar, with less than fifteen-percent unskilled jobs. In the trucking industry alone there is a need for over 80,000 new drivers over the next five years. The new generation of drivers must be safe, skilled and computer literate.

Coker: Why would a company hire anyone not skilled for a skilled position? That just doesn’t make strategic sense or good business. You would think they would know better. It sounds to me like companies are not using the appropriate strategic tools and wasting a great opportunity to seize a competitive advantage.

Wolfe: Companies nationwide are experiencing turnover that’s killing their bottom-line. The loss of knowledgeable and experienced personnel is effecting the quality of goods and services they are delivering. The American Customer Satisfaction Index (ASCI) reports a plummeting consumer satisfaction with service in nearly every industry since 1994, the same time period of the increasing employment rate. Customer retention is suffering, which increases company costs by adding to the sales and marketing efforts needed to acquire new customers. And the reason is quite simple – it’s a competitive job market out there and companies aren’t responding effectively.

Coker: Competition has built our economy. I love it! Companies who recognize that people are the fuel they need to drive the company’s engine will reap immediate savings and increase their odds for long-term growth. These very companies are the ones facing the labor challenge and winning. They’re hiring smarter, by using selection tools to help choose the right people and then benchmarking their winners and losers. They don’t need a large labor pool – and they don’t have the high turnover rates, because as Fred Lauer (author of "Hiring the entry level employee") states, they "hire by personality, not by resume."

Wolfe: That’s just great. Human resource managers already have their hands full. There are so many EEOC and ADA guidelines now that selecting, developing and retaining the right employees is difficult at best. Testing adds more to a strained budget and creates more paperwork.

Coker: In the past, good business strategy was for businesses to focus their resources on capturing market share for customers. Now we must include equal, if not greater, resources, on capturing a market share of employees.

Wolfe: Treating customers and employees the same? Okay, I’ll buy that. Let’s say it is an employees market out there. The new labor force, the Gen-Xer’s and Generation Y’s are demanding and diverse. You have to admit that money is a satisfier but not a long-term retainer or motivator. This new force demands flextime, intellectual challenges, career development opportunities and training.

Coker: How are you going to meet the individual and cultural needs of such a demographically and generationally diverse work force? It really doesn’t matter what generation people come from. If you can’t communicate with them and they don’t understand what needs to be done, then job satisfaction will dissipate, employee and customer turnover will increase and productivity will suffer suffers.

Wolfe: You’re still missing the point. It’s a worker’s market. There’s a shortage now and it’s going to get worse. Companies must market and cater to employees just like they do customers. An employer must create a business environment that motivates people and makes them excited about working or buying from them. Employers must treat people the way they want to be treated and do their best to accommodate very diverse needs. Research has proven that a loyal, enthusiastic workforce generates customer loyalty and profits. It just makes good sense.

Coker: Ira, I don’t disagree with what you’ve said. I think it’s you that’s missing the point. Employers must respond in a smart way, which may not be the way it’s always been done. Nearly thirty-five percent of America’s corporations use employee screening and assessment tools to hire, screen and career path their employees. Recent studies by TTI Performance Systems, Ltd. indicated that by the year 2005 sixty-five percent of these companies will rely on this approach. Assessment tools are the smart way to work. Quite frankly if you’re not using them, and your competitors (for the same employees) are, your pool of candidates will be the left-overs. The return on investment with these hiring tools will repay you many times over. The expenses saved by reducing new hire training and hiring costs in general drop right to the bottom line.

Wolfe: What about the huge lawsuits settled in the past year or so that cost companies millions of dollars? A case settled in California this past year stated very plainly that you couldn’t use a test for hiring unless it has application for the position itself.

Coker: You are way off base. Testing is legal. Title VII of the Civil Rights Act of 1964 and the Uniform Guidelines on Employee Selection of 1978 provides guidelines for using testing to make hiring decisions. If the tests are job relevant, reliable, valid, and used consistently without discrimination the results are safe and predictive.

The key element is to use an empirical approach to selection and hiring. You redirect the focus away from the employee alone. You must first understand how the current business culture affects all types of employee behaviors. Then you define the behaviors, attitudes and motivations of each job that are required to meet the performance goals of the company.

Wolfe: We have been using a hiring process called Select-In ™: Hire Right For Higher Performance. The reference book describes how to identify the behaviors, attitudes, and motivations for a company culture, the job and the people. Once defined, a structured interview is developed to evaluate how well a candidate will fit the position. Are you telling me this is the way employers must approach hiring or are you indicating a different approach must be used?

Coker: A structured hiring guide, like Select-In, is exactly the protocol I am recommending. I do believe, however, employers need to reevaluate their hiring process on a continual basis. Remember that the only purpose of the hiring process should be to accurately assess an applicant’s ability to perform in a job effectively, consistently and with a minimum of stress.

Wolfe: Okay, so how do we get all these employers to hire industrial psychologists or whatever it takes and then test every candidate. I agree it is the right way but some may think it’s ridiculous? Are you suggesting no one should be hired without being tested, regardless of the skill level of the required position? I cannot believe that there will ever be a test that substitutes for that "gut" feeling you get when you know you have found someone who thinks the way you do.

Coker: Seven years ago, Managing Human Resources Magazine (10/92) made this statement "Testing is the best predictor of success. It’s accurate well over half the time, while no other method even comes close". Assessments have gotten even better since then! However, the most widely used tool for assessing applicants has been and continues to be the personal interview. The problem is interviews have been clearly identified as an ineffective and inaccurate predictor (.14 predictive validity) of how well an applicant performs on the job. (.00 validity indicates that a roll of the dice would be an equally accurate method to choose an employee; 1.00 indicates the highest predictability.)

"Most interviewers, however", according to Michael Mercer in Hire The Best…Avoid the Rest, "do not know how to interview and/or how to make valid or accurate predictions based on the interviews." In addition the courts have identified interviews as lacking consistency, demonstrating bias, and asking questions that were not job-relevant.

Wolfe: Well finally you’re beginning to make sense. Just remember: the government regulations seem to protect everyone but the employer. Companies seem to spend more time training their managers and supervisors to comply with what they cannot ask than structuring a hiring process that reasonably predicts success on the job. Companies, in fear of wrongful discharge and discrimination suits, invest millions of dollars to retain underperforming and mismatched employees. Saratoga Institute states that the clear leader in costs of termination, hiring or the new hire is clearly the cost of the new hire. In a recent Wall Street Journal article, Brian McQuaid, executive director of human resources for MCI, shared: "A new hire can accomplish only 60% as much in the first few months as an experience worker, and serve customers less well."

Coker: So, listen to me when I say that you should quit hiring by luck, chance, intuition, gut feeling or rolling the dice. That’s not only a poor strategy but likely exposes a company to even greater risk. Besides the reasons listed above, a company is six times more likely to be sued for terminating an employee than not hiring one in the first place.

Wolfe: What are the current methods we should be using to measure the match of an applicant’s MASK – motivations, attitudes/behaviors, skills, and knowledge – to the job and to measure the difference between different applicants?"

Coker: You can uncover most of the information you need if you complete a structured interview, good reference checks, and integrity, personality and skills tests. Many employers might find it interesting to know that, according to the Uniform Guidelines, all hiring procedures, including interviews and reference checks, must be treated the same as employment testing. Using standardized tests reduces inconsistency and bias, and show considerable validity for predicting job performance for many jobs (.38 to .53 depending on the type of test and job compared to the .14 for the interview).

Wolfe: They may be predictive, but how is a human resource professional to know which test to use in their unique corporate environment and for which positions? Are there not over 30,000 tests alone listed in Tests in Print (Burroughs Institute)?

Coker: First of all, you are trying to make things way too difficult. There are many organizations out there that can certify any human resource or management professional in interpreting assessment results and quickly illustrate how to benchmark your employees. You can choose from any of the following categories:

Behavioral Assessment:

Values and Attitudes Assessment:

Motivational Questionnaire

Wolfe: I’m familiar with the Behavioral Assessment. It answers the following questions: How will the prospective employee approach the job? How assertive will he/she be? Will he/she be outspoken and involved, or quiet and prefer to work alone? Will he/she work at a rapid pace and multi-task? Will they be precise or do things their way?

Coker: Exactly. However, you need to go further. How an employee will perform the job is only a part of the picture. Another marvelous tool is The Personal Interests, Attitudes, and Values Assessment, which answers: "What will motivate an employee to do the job" and "can your work environment as well as the managers satisfy the stimulus and rewards needed for these motivations"? The motivational questionnaires answer "How much intensity will the employee bring to the job? Is it enough or too much? How efficient are they? How effective will they perform under challenging conditions or when expectations are unmet? Will they perform safely or tend to be involved or cause accidents? Will they be motivated to share their knowledge or withhold information?"

Wolfe: Why measure motivations, attitudes and behaviors? Isn’t that overkill? Didn’t you mention before that the most severe shortages would be in the skilled areas? Why not just read their resumes and do the appropriate background checks?

Coker: First, you need a clear understanding of the employees’ ability to achieve success in the job and in your culture. Second, people with the right behavioral style, attitudes consistent with the culture, and motivation needed to thrive in the job and environment are more likely to get up to full-speed quicker, learn and be challenged, stay longer, make fewer errors, more dependable, reliable, make better team players, and in short, provide a much better return on your payroll and training investment.

Wolfe: Ok. I agree that this screening is helpful, but you still haven’t addressed the main issue: What happens if we can’t find enough people to fill the slots?"

Coker: I knew you’d bring that up again. It clearly will be a rough road ahead. Management has two crucial decisions to get off the turnover merry-go-round. First, define as priority one, to create a culture promoting employee loyalty. Second, hire the people that blend with the required performance needs and values. Companies with employee loyalty will focus their resources on producing their core products or services, while companies focused on finding employees will get picked off in the marketplace.