“The inability to envision a certain kind of person doing a certain kind of thing because you’ve never seen someone who looks like him do it before is not just a vice. It’s a luxury. What begins as a failure of the imagination ends as a market inefficiency: when you rule out an entire class of people from doing a job simply by their appearance, you are less likely to find the best person for the job.”Michael Lewis, “Moneyball: The Art of Winning and Unfair Game”
“All Creatures Great and Small”, the autobiography by James Herriot set in 1930s Yorkshire, England, provides powerful instruction on how to select employees who will flourish. The books (and famous TV series) begin with newly minted veterinarian James Herriot traveling from Scotland to Yorkshire to interview for an assistant veterinarian position in a growing practice run by Siegfried Farnon. Siegfried, who has built a thriving practice based on his unswerving dedication to science and service, has already been through five candidates before James arrives. Upon meeting his anxious applicant, Siegfried tosses James’ resume aside, points to his car, and says, “let’s go.” James spends the day mending lame horses, pulling calves, and interacting with their no-nonsense Yorkshire owners under Siegfried’s watchful eye. His best suit is covered in mud and muck, James does well enough on his “interview” to earn a pint at the pub and an invitation to stay.
Siegfried understands that he needs to measure how his applicants will perform on the job, not how well they write resumes or come across in rehearsed conversation. He also understands that it’s not enough that an applicant can perform a task, it’s equally important that the candidate fits the culture, meaning the shared values, expectations, and other human factors that help determine how happy and productive we are at work. And as a scientist, he knows that his process needs to be as unbiased as possible; his reputation and his business are at stake. Yet studies show that resumes and unstructured interviews remain the primary means by which most employers select new hires. And studies also find the results to be appalling. Resumes have been shown to have almost no correlation at all with job performance and unstructured interviews are no better than flipping a coin.
On average, U.S. companies experience 19% employee turnover each year, or roughly one out of every five employees. High-performers turnover at only 3% on average while low-performers turnover much faster. A staggering 66% of new hires report realizing they were in the wrong job within the first year and ten times as many employees leave in their first year as leave after five years. In other words, current employee selection efforts have created an employment market based almost solely on random trial and error. And bad hiring decisions cost companies hundreds of billions of dollars, not to mention the toll on the mental and physical health of employees who report “dreading” going to work each day (26% of the workforce). Even more worrisome, the money being spent on corporate diversity programs does not appear to be achieving the desired results, especially in the financial services industry. Here’s where most employee selection efforts break down:
- Selection techniques commonly used today are fraught with biases and studies have shown that even companies attempting to utilize unbiased assessment tools either do not apply them consistently or do not utilize the results consistently
- Job descriptions are often vague or poorly designed which leads to ambiguity for everyone involved and makes objectivity nearly impossible
- Employees rarely get a chance to experience a role before they must commit and employers rarely get to observe an applicant’s fitness for a position before they extend an offer
- Few companies provide either mentorship or sufficient training; both are proven to increase employee retention and are particularly effective at fostering a diverse workforce
- “Culture” (the shared values of an organization) is ad hoc, poorly defined or actually reinforces selection biases, once again making objectivity and clear-eyed decisions nearly impossible
At Home Factor, we believe that if what you’re doing isn’t working, you should probably try something different and we are committed to revolutionizing the way the mortgage industry attracts and develops new talent. We view this as a moral imperative as well as good business and see our work and investment in this cause as laying the groundwork for a better mortgage industry and a better home buying experience for our clients. How did things turn out for James Herriot? Siegfried’s commitment to employee selection netted James a successful 50-year career and together they created an enormously successful practice that’s still operating today.