Download the article, read it carefully and answer the following questions. 

Assignment Questions: 

1. Summarize the article in your own words. (minimum of 250 words).[Marks:2]

2. Reliance on data science in the hiring process, is this critical to the desired outcome? Describe this in no less than 100 words.[Marks: 2]

3. Discuss why employers find the hiring process difficult? Make some suggestions to develop such a recruitment process which can hire the best employees for the organization.  [Marks: 1]

Learning Outcome:

1. Demonstrate a thorough understanding of an HR Strategic planning which includes Effective job analysis, Recruitment and selection strategies (Lo 1.6 & 1.7).

2. Demonstrate overall Human Resource concepts, goals and strategies within the context of organizations goals and strategies (Lo 1.1).

Assignment Structure:

S.No

Assignment Type

Marks

Assignment-1

Critical Review

5

1.
Instruction to search the Article:

1. Via your student services page, log in to the Saudi Digital Library.

1. After your login with your student ID, search for the following article:

“Your Approach to Hiring is all Wrong”, by Cappelli, Peter. Harvard Business Review. May/Jun2019, Vol. 97 Issue 3, p48-58.

Download the article, read it carefully and answer the following questions.

Assignment Questions:

1. Summarize the article in your own words. (minimum of 250 words).[Marks:2]

1. Reliance on data science in the hiring process, is this critical to the desired outcome? Describe this in no less than 100 words.[Marks: 2]

1. Discuss why employers find the hiring process difficult? Make some suggestions to develop such a recruitment process which can hire the best employees for the organization. [Marks: 1]

48 Harvard Business ReviewMay–June 201948 Harvard Business ReviewMay–June 2019

Harvard Business Review
May–June 2019 49Harvard Business ReviewMay–June 2019 49Photographs by JOHN KUCZALA

Your Approach to
Hiring Is All Wrong

B U S I N E S S E S H AV E N E V E R done as much hiring as they do today.
They’ve never spent as much money doing it. And they’ve never
done a worse job of it.

For most of the post–World War II era, large corporations went
about hiring this way: Human resources experts prepared a detailed
job analysis to determine what tasks the job required and what
attributes a good candidate should have. Next they did a job evalu-
ation to determine how the job fit into the organizational chart and
how much it should pay, especially compared with other jobs. Ads
were posted, and applicants applied. Then came the task of sorting
through the applicants. That included skills tests, reference checks,
maybe personality and IQ tests, and extensive interviews to learn
more about them as people. William H. Whyte, in The Organization
Man, described this process as going on for as long as a week before

Peter Cappelli
Professor,
the Wharton School

Outsourcing and algorithms won’t
get you the people you need.

50 Harvard Business ReviewMay–June 2019

subcontractors can scan websites that
programmers might visit, trace their
“digital exhaust” from cookies and
other user-tracking measures to iden-
tify who they are, and then examine
their curricula vitae.

At companies that still do their own
recruitment and hiring, managers
trying to fill open positions are largely
left to figure out what the jobs require
and what the ads should say. When
applications come—always electron-
ically—applicant-tracking software
sifts through them for key words that
the hiring managers want to see. Then
the process moves into the Wild West,
where a new industry of vendors offer
an astonishing array of smart-sounding
tools that claim to predict who will be
a good hire. They use voice recogni-
tion, body language, clues on social
media, and especially machine learning
algorithms—everything but tea leaves.
Entire publications are devoted to what
these vendors are doing.

The big problem with all these new
practices is that we don’t know whether
they actually produce satisfactory hires.
Only about a third of U.S. companies
report that they monitor whether their
hiring practices lead to good employees;
few of them do so carefully, and only
a minority even track cost per hire and
time to hire. Imagine if the CEO asked

how an advertising campaign had gone,
and the response was “We have a good
idea how long it took to roll out and
what it cost, but we haven’t looked to
see whether we’re selling more.”

Hiring talent remains the number
one concern of CEOs in the most recent
Conference Board Annual Survey;
it’s also the top concern of the entire
executive suite. PwC’s 2017 CEO survey
reports that chief executives view the
unavailability of talent and skills as
the biggest threat to their business.
Employers also spend an enormous
amount on hiring—an average of $4,129
per job in the United States, according
to Society for Human Resource Manage-
ment estimates, and many times that
amount for managerial roles—and the
United States fills a staggering 66 mil-
lion jobs a year. Most of the $20 billion
that companies spend on human
resources vendors goes to hiring.

Why do employers spend so much on
something so important while knowing
so little about whether it works?

WHERE THE PROBLEM STARTS
Survey after survey finds employers
complaining about how difficult hiring
is. There may be many explanations,
such as their having become very picky
about candidates, especially in the

Idea in
Brief

THE PROBLEM
Employers continue to hire at a high
rate and spend enormous sums to do
it. But they don’t know whether their
approaches are effective at finding
and selecting good candidates.

THE ROOT CAUSES
Businesses focus on external candidates
and don’t track the results of their
approaches. They often use outside
vendors and high-tech tools that are
unproven and have inherent flaws.

THE SOLUTION
Return to filling most positions by
promoting from within. Measure the
results produced by vendors and
new tools, and be on the lookout for
discrimination and privacy violations.

the winning candidate was offered the
job. The vast majority of non-entry-
level openings were filled from within.

Today’s approach couldn’t be more
different. Census data shows, for
example, that the majority of people
who took a new job last year weren’t
searching for one: Somebody came
and got them. Companies seek to fill
their recruiting funnel with as many
candidates as possible, especially “pas-
sive candidates,” who aren’t looking to
move. Often employers advertise jobs
that don’t exist, hoping to find people
who might be useful later on or in a
different context.

The recruiting and hiring function
has been eviscerated. Many U.S.
companies—about 40%, according to
research by Korn Ferry—have out-
sourced much if not all of the hiring
process to familiar organizations such
as Randstad, Manpower, and Adecco,
which in turn use subcontractors,
typically in India and the Philippines.
The subcontractors scour LinkedIn and
social media to find potential candi-
dates. They sometimes contact them
directly to see whether they can be
persuaded to apply for a position and
negotiate the salary they’re willing to
accept. (The recruiters get incentive pay
if they negotiate the amount down.) To
hire programmers, for example, these

Harvard Business Review
May–June 2019 51

slack labor market of the Great Reces-
sion. But clearly they are hiring much
more than at any other time in modern
history, for two reasons.

The first is that openings are now
filled more often by hiring from the
outside than by promoting from within.
In the era of lifetime employment, from
the end of World War II through the
1970s, corporations filled roughly 90%
of their vacancies through promotions
and lateral assignments. Today the
figure is a third or less. When they
hire from outside, organizations don’t
have to pay to train and develop their
employees. Since the restructuring
waves of the early 1980s, it has been rel-
atively easy to find experienced talent
outside. Only 28% of talent acquisition
leaders today report that internal candi-
dates are an important source of people
to fill vacancies—presumably because
of less internal development and fewer
clear career ladders.

Less promotion internally means
that hiring efforts are no longer concen-
trated on entry-level jobs and recent
graduates. (If you doubt this, go to the
“careers” link on any company website
and look for a job opening that doesn’t
require prior experience.) Now com-
panies must be good at hiring across
most levels, because the candidates
they want are already doing the job
somewhere else. These people don’t
need training, so they may be ready
to contribute right away, but they are
much harder to find.

The second reason hiring is so diffi-
cult is that retention has become tough:
Companies hire from their competitors
and vice versa, so they have to keep
replacing people who leave. Census and

Bureau of Labor Statistics data shows
that 95% of hiring is done to fill existing
positions. Most of those vacancies are
caused by voluntary turnover. LinkedIn
data indicates that the most common
reason employees consider a position
elsewhere is career advancement—
which is surely related to employers’
not promoting to fill vacancies.

The root cause of most hiring, there-
fore, is drastically poor retention. Here
are some simple ways to fix that:

Track the percentage of openings
filled from within. An adage of business
is that we manage what we measure,
but companies don’t seem to be
applying that maxim to tracking hires.
Most are shocked to learn how few of
their openings are filled from within—is
it really the case that their people can’t
handle different and bigger roles?

Require that all openings be posted
internally. Internal job boards were
created during the dot-com boom to
reduce turnover by making it easier for
people to find new jobs within their
existing employer. Managers weren’t
even allowed to know if a subordi-
nate was looking to move within the
company, for fear that they would try to
block that person and he or she would
leave. But during the Great Recession
employees weren’t quitting, and many
companies slid back to the old model
whereby managers could prevent their
subordinates from moving internally.
JR Keller, of Cornell University, has
found that when managers could fill
a vacancy with someone they already
had in mind, they ended up with
employees who performed more poorly
than those hired when the job had been
posted and anyone could apply. The

commonsense explanation for this is
that few enterprises really know what
talent and capabilities they have.

Recognize the costs of outside
hiring. In addition to the time and
effort of hiring, my colleague Matthew
Bidwell found, outside hires take three
years to perform as well as internal
hires in the same job, while internal
hires take seven years to earn as much
as outside hires are paid. Outside hiring
also causes current employees to spend
time and energy positioning them-
selves for jobs elsewhere. It disrupts
the culture and burdens peers who
must help new hires figure out how
things work.

Finding out whether your practices result
in good hires is not only basic to good
management but the only real defense
against claims of adverse impact and
discrimination. Other than white males
under age 40 with no disabilities or work-
related health problems, workers have
special protections under federal and
state laws against hiring practices that
may have an adverse impact on them. As
a practical matter, that means if members
of a particular group are less likely to be
recruited or hired, the employer must show
that the hiring process is not discriminatory.

The only defense against evidence of
adverse impact is for the employer to show
that its hiring practices are valid—that is,
they predict who will be a good employee
in meaningful and statistically significant
ways—and that no alternative would predict
as well with less adverse impact. That
analysis must be conducted with data on
the employer’s own applicants and hires.
The fact that the vendor that sold you the
test you use has evidence that it was valid
in other contexts is not sufficient.

Protecting Against
Discrimination

52 Harvard Business ReviewMay–June 2019

None of this is to suggest that
outside hiring is necessarily a bad idea.
But unless your company is a Silicon
Valley gazelle, adding new jobs at a
furious pace, you should ask yourself
some serious questions if most of your
openings are being filled from outside.

A different approach for dealing with
retention (which seems creepy to some)
is to try to determine who is interested
in leaving and then intervene. Vendors
like Jobvite comb social media and
public sites for clues, such as LinkedIn
profile updates. Measuring “flight risk”
is one of the most common goals of
companies that do their own sophisti-
cated HR analytics. This is reminiscent
of the early days of job boards, when
employers would try to find out who
was posting résumés and either punish
them or embrace them, depending on
leadership’s mood.

Whether companies should be
examining social media content
in relation to hiring or any other
employment action is a challenging
ethical question. On one hand, the
information is essentially public and
may reveal relevant information. On
the other hand, it is invasive, and
candidates are rarely asked for permis-
sion to scrutinize their information.
Hiring a private detective to shadow
a candidate would also gather public
information that might be relevant,
yet most people would view it as an
unacceptable invasion of privacy.

THE HIRING PROCESS
When we turn to hiring itself, we
find that employers are missing the
forest for the trees: Obsessed with new

technologies and driving down costs,
they largely ignore the ultimate goal:
making the best possible hires. Here’s
how the process should be revamped:

Don’t post “phantom jobs.” It
costs nothing to post job openings
on a company website, which are
then scooped up by Indeed and other
online companies and pushed out
to potential job seekers around the
world. Thus it may be unsurprising
that some of these jobs don’t really
exist. Employers may simply be fishing
for candidates. (“Let’s see if someone
really great is out there, and if so, we’ll
create a position for him or her.”) Often
job ads stay up even after positions
have been filled, to keep collecting
candidates for future vacancies or just
because it takes more effort to pull the
ad down than to leave it up. Some-
times ads are posted by unscrupulous
recruiters looking for résumés to pitch
to clients elsewhere. Because these
phantom jobs make the labor market
look tighter than it really is, they are a
problem for economic policy makers
as well as for frustrated job seekers.
Companies should take ads down
when jobs are filled.

Design jobs with realistic
requirements. Figuring out what the
requirements of a job should be—and
the corresponding attributes candi-
dates must have—is a bigger challenge
now, because so many companies
have reduced the number of internal
recruiters whose function, in part, is
to push back on hiring managers’ wish
lists. (“That job doesn’t require 10
years of experience,” or “No one with
all those qualifications will be willing
to accept the salary you’re proposing

to pay.”) My earlier research found that
companies piled on job requirements,
baked them into the applicant-tracking
software that sorted résumés according
to binary decisions (yes, it has the key
word; no, it doesn’t), and then found
that virtually no applicants met all
the criteria. Trimming recruiters, who
have expertise in hiring, and handing
the process over to hiring managers is
a prime example of being penny-wise
and pound-foolish.

Reconsider your focus on passive
candidates. The recruiting process
begins with a search for experienced
people who aren’t looking to move.
This is based on the notion that some-
thing may be wrong with anyone who
wants to leave his or her current job. (Of
the more than 20,000 talent profession-
als who responded to a LinkedIn survey
in 2015, 86% said their recruiting
organizations focused “very much so”
or “to some extent” on passive candi-
dates; I suspect that if anything, that
number has since grown.) Recruiters
know that the vast majority of people
are open to moving at the right price:
Surveys of employees find that only
about 15% are not open to moving. As
the economist Harold Demsetz said
when asked by a competing university
if he was happy working where he was:
“Make me unhappy.”

Fascinating evidence from the
LinkedIn survey cited above shows that
although self-identified “passive” job
seekers are different from “active”
job seekers, it’s not in the way we might
think. The number one factor that
would encourage the former to move
is more money. For active candidates
the top factor is better work and

Obsessed with new technologies and driving down
costs, employers largely ignore the ultimate goal:
making the best possible hires.

Harvard Business Review
May–June 2019 53Photographs by TONY ROSLUND

54 Harvard Business ReviewMay–June 2019

career opportunities. More active than
passive job seekers report that they are
passionate about their work, engaged in
improving their skills, and reasonably
satisfied with their current jobs. They
seem interested in moving because
they are ambitious, not because they
want higher pay.

Employers spend a vastly dispro-
portionate amount of their budgets on
recruiters who chase passive candi-
dates, but on average they fill only 11%
of their positions with individually
targeted people, according to research
by Gerry Crispin and Chris Hoyt, of
CareerXroads. I know of no evidence
that passive candidates become better
employees, let alone that the process is
cost-effective. If you focus on passive
candidates, think carefully about what
that actually gets you. Better yet, check
your data to find out.

Understand the limits of referrals.
The most popular channel for finding
new hires is through employee
referrals; up to 48% come from them,
according to LinkedIn research. It
seems like a cheap way to go, but does
it produce better hires? Many employ-
ers think so. It’s hard to know whether
that’s true, however, given that they
don’t check. And research by Emilio
Castilla and colleagues suggests other-
wise: They find that when referrals
work out better than other hires, it’s
because their referrers look after them
and essentially onboard them. If a refer-
rer leaves before the new hire begins,
the latter’s performance is no better
than that of nonreferrals, which is why
it makes sense to pay referral bonuses
six months or so after the person is
hired—if he or she is still there.

A downside to referrals, of course,
is that they can lead to a homogeneous
workforce, because the people we
know tend to be like us. This matters
greatly for organizations interested in
diversity, since recruiting is the only
avenue allowed under U.S. law to
increase diversity in a workforce. The
Supreme Court has ruled that demo-
graphic criteria cannot be used even to
break ties among candidates.

Measure the results. Few employ-
ers know which channel produces
the best candidates at the lowest cost
because they don’t track the outcomes.
Tata is an exception: It has long done
what I advocate. For college recruiting,
for example, it calculates which schools
send it employees who perform the
best, stay the longest, and are paid the
lowest starting wage. Other employ-
ers should follow suit and monitor
recruiting channels and employees’
performance to identify which sources
produce the best results.

Persuade fewer people to apply.
The hiring industry pays a great deal
of attention to “the funnel,” whereby
readers of a company’s job postings
become applicants, are interviewed,
and ultimately are offered jobs.
Contrary to the popular belief that
the U.S. job market is extremely tight
right now, most jobs still get lots of
applicants. Recruiting and hiring
consultants and vendors estimate that
about 2% of applicants receive offers.
Unfortunately, the main effort to
improve hiring—virtually always aimed
at making it faster and cheaper—has
been to shovel more applicants into the
funnel. Employers do that primarily
through marketing, trying to get out the

word that they are great places to work.
Whether doing this is a misguided way
of trying to attract better hires or just
meant to make the organization feel
more desirable isn’t clear.

Much better to go in the other
direction: Create a smaller but better-
qualified applicant pool to improve
the yield. Here’s why: Every applicant
costs you money—especially now,
in a labor market where applicants
have started to “ghost” employers,
abandoning their applications midway
through the process. Every application
also exposes a company to legal risk,
because the company has obligations
to candidates (not to discriminate, for
example) just as it does to employees.
And collecting lots of applicants in a
wide funnel means that a great many
of them won’t fit the job or the com-
pany, so employers have to rely on
the next step of the hiring process—
selection—to weed them out. As we
will see, employers aren’t good at that.

Organizations are much more interested in external
talent than in their own employees to fill vacancies.

Top channels for quality hires

Based on a 2017 survey of 3,973 talent-acquisition decision makers
who work in corporate HR departments and are LinkedIn members.
Source: LinkedIn

48%

46

40

34

28

Employee referrals

Third-party websites or online job boards

Social or professional networks

Third-party recruiters or staffing firms

Internal hires

The Grass Is
Always Greener…

Harvard Business Review
May–June 2019 55

Once people are candidates, they
may not be completely honest about
their skills or interests—because they
want to be hired—and employers’ abil-
ity to find out the truth is limited. More
than a generation ago the psychologist
John Wanous proposed giving appli-
cants a realistic preview of what the job
is like. That still makes sense as a way to
head off those who would end up being
unhappy in the job. It’s not surprising
that Google has found a way to do this
with gamification: Job seekers see what
the work would be like by playing a
game version of it. Marriott has done
the same, even for low-level employ-
ees. Its My Marriott Hotel game targets
young people in developing countries
who may have had little experience in
hotels to show them what it’s like and
to steer them to the recruiting site if
they score well on the game. The key
for any company, though, is that the
preview should make clear what is diffi-
cult and challenging about the work as
well as why it’s fun so that candidates
who don’t fit won’t apply.

It should be easy for candidates
to learn about a company and a job,
but making it really easy to apply, just
to fill up that funnel, doesn’t make
much sense. During the dot-com
boom Texas Instruments cleverly
introduced a preemployment test that
allowed applicants to see their scores
before they applied. If their scores
weren’t high enough for the company
to take their applications seriously,
they tended not to proceed, and the
company saved the cost of having to
process their applications.

If the goal is to get better hires in
a cost-effective manner, it’s more

important to scare away candidates
who don’t fit than to jam more candi-
dates into the recruiting funnel.

Test candidates’ standard skills.
How to determine which candidates to
hire—what predicts who will be a good
employee—has been rigorously studied
at least since World War I. The person-
nel psychologists who investigated this
have learned much about predicting
good hires that contemporary organiza-
tions have since forgotten, such as that
neither college grades nor unstructured
sequential interviews (hopping from
office to office) are a good predictor,
whereas past performance is.

Since it can be difficult (if not impos-
sible) to glean sufficient information
about an outside applicant’s past perfor-
mance, what other predictors are good?
There is remarkably little consensus
even among experts. That’s mainly
because a typical job can have so many
tasks and aspects, and different factors
predict success at different tasks.

There is general agreement, how-
ever, that testing to see whether indi-
viduals have standard skills is about
the best we can do. Can the candidate
speak French? Can she do simple
programming tasks? And so forth. But
just doing the tests is not enough. The
economists Mitchell Hoffman, Lisa B.
Kahn, and Danielle Li found that even
when companies conduct such tests,
hiring managers often ignore them—
and when they do, they get worse
hires. The psychologist Nathan Kuncel
and colleagues discovered that even
when hiring managers use objective
criteria and tests, applying their own
weights and judgment to those criteria
leads them to pick worse candidates

than if they had used a standard
formula. Only 40% of employers,
however, do any tests of skills or
general abilities, including IQ. What
are they doing instead? Seventy-four
percent do drug tests, including for
marijuana use; even employers in
states where recreational use is now
legal still seem to do so.

Be wary of vendors bearing high-
tech gifts. Into the testing void has
come a new group of entrepreneurs
who either are data scientists or
have them in tow. They bring a fresh
approach to the hiring process—but
often with little understanding of how
hiring actually works. John Sumser, of
HRExaminer, an online newsletter that
focuses on HR technology, estimates
that on average, companies get five to
seven pitches every day—almost all
of them about hiring—from vendors
using data science to address HR
issues. These vendors have all sorts
of cool-sounding assessments, such
as computer games that can be scored
to predict who will be a good hire. We
don’t know whether any of these actu-
ally lead to better hires, because few
of them are validated against actual
job performance. That aside, these
assessments have spawned a counter-
wave of vendors who help candidates
learn how to score well on them.
Lloyds Bank, for example, developed
a virtual-reality-based assessment of
candidate potential, and JobTestPrep
offers to teach potential candidates
how to do well on it. Especially for IT
and technical jobs, cheating on skills
tests and even video interviews (where
colleagues off camera give help) is
such a concern that eTeki and other

56 Harvard Business ReviewMay–June 2019

specialized vendors help employers
figure out who is cheating in real time.

Revamp your interviewing pro-
cess. The amount of time employers
spend on interviews has almost dou-
bled since 2009, according to research
from Glassdoor. How much of that
increase represents delays in setting up
those interviews is impossible to tell,
but it provides at least a partial expla-
nation for why it takes longer to fill jobs
now. Interviews are arguably the most
difficult technique to get right, because
interviewers should stick to questions
that predict good hires—mainly about
past behavior or performance that’s
relevant to the tasks of the job—and ask
them consistently across candidates.

Just winging it and asking whatever
comes to mind is next to useless.

More important, interviews are
where biases most easily show up,
because interviewers do usually decide
on the fly what to ask of whom and
how to interpret the answer. Every-
one knows some executive who is
absolutely certain he knows the one
question that will really predict good
candidates (“If you were stranded on a
desert island…”). The sociologist Lauren
Rivera’s examination of interviews for
elite positions, such as those in pro-
fessional services firms, indicates that
hobbies, particularly those associated
with the rich, feature prominently as a
selection criterion.

Interviews are most important for
assessing “fit with our culture,” which
is the number one hiring criterion
employers report using, according to
research from the Rockefeller Founda-
tion. It’s also one of the squishiest attri-
butes to measure, because few organi-
zations have an accurate and consistent
view of their own culture—and even if
they do, understanding what attributes
represent a good fit is not straightfor-
ward. For example, does the fact that
an applicant belonged to a fraternity
reflect experience working with others
or elitism or bad attitudes toward
women? Should it be completely
irrelevant? Letting someone with no
experience or training make such calls

Recruiting managers desperately
need new tools, because the
existing ones—unstructured
interviews, personality tests,
personal referrals—aren’t very
effective. The newest develop­
ment in hiring, which is both
promising and worrying, is the
rise of data science–driven
algorithms to find and assess job
candidates. By my count, more
than 100 vendors are creating and
selling these tools to companies.

Unfortunately, data science—which
is still in its infancy when it comes
to recruiting and hiring—is not yet
the panacea employers hope for.

Vendors of these new tools
promise they will help reduce
the role that social bias plays in
hiring. And the algorithms can
indeed help identify good job
candidates who would previously
have been screened out for lack
of a certain education or social
pedigree. But these tools may also

identify and promote the use of
predictive variables that are (or
should be) troubling.

Because most data scientists
seem to know so little about the
context of employment, their tools
are often worse than nothing.
For instance, an astonishing
percentage build their models
by simply looking at attributes
of the “best performers” in
workplaces and then identifying
which job candidates have
the same attributes. They use
anything that’s easy to measure:
facial expressions, word choice,
comments on social media, and
so forth. But a failure to check
for any real difference between
high­performing and low­
performing employees on these
attributes limits their usefulness.
Furthermore, scooping up data
from social media or the websites

people have visited also raises
important questions about
privacy. True, the information
can be accessed legally; but
the individuals who created the
postings didn’t intend or authorize
them to be used for such
purposes. Furthermore, is
it fair that something you posted
as an undergrad can end up
driving your hiring algorithm a
generation later?

Another problem with machine
learning approaches is that
few employers collect the large
volumes of data—number of
hires, performance appraisals,
and so on—that the algorithms
require to make accurate
predictions. Although vendors
can theoretically overcome that
hurdle by aggregating data from
many employers, they don’t
really know whether individual

Data Science Can’t
Fix Hiring (Yet)

Harvard Business Review
May–June 2019 57

is a recipe for bad hires and, of course,
discriminatory behavior. Think hard
about whether your interviewing
protocols make any sense and resist the
urge to bring even more managers into
the interview process.

Recognize the strengths and weak-
nesses of machine learning models.
Culture fit is another area into which
new vendors are swarming. Typically
they collect data from current employ-
ees, create a machine learning model
to predict the attributes of the best
ones, and then use that model to hire
candidates with the same attributes.

As with many other things in this
new industry, that sounds good until
you think about it; then it becomes

replete with problems. Given the best
performers of the past, the algorithm
will almost certainly include white and
male as key variables. If it’s restricted
from using that category, it will come up
with attributes associated with being a
white male, such as playing rugby.

Machine learning models do have
the potential to find important but
previously unconsidered relationships.
Psychologists, who have dominated
research on hiring, have been keen
to study attributes relevant to their
interests, such as personality, rather
than asking the broader question
“What identifies a potential good hire?”
Their results gloss over the fact that
they often have only a trivial ability to

predict who will be a good performer,
particularly when many factors are
involved. Machine learning, in contrast,
can come up with highly predictive
factors. Research by Evolv, a workforce
analytics pioneer (now part of Corner-
stone OnDemand), found that expected
commuting distance for the candidate
predicted turnover very well. But
that’s not a question the psychological
models thought to ask. (And even that
question has problems.)

The advice on selection is straight-
forward: Test for skills. Ask assess-
ments vendors to show evidence that
they can actually predict who the good
employees will be. Do fewer, more-
consistent interviews.

company contexts are so distinct
that predictions based on data
from the many are inaccurate for
the one.

Yet another issue is that all
analytic approaches to picking
candidates are backward
looking, in the sense that they
are based on outcomes that have
already happened. (Algorithms
are especially reliant on past
experiences in part because
building them requires lots and
lots of observations—many years’
worth of job performance data
even for a large employer.) As
Amazon learned, the past may be
very different from the future you
seek. It discovered that the hiring
algorithm it had been working
on since 2014 gave lower scores
to women—even to attributes
associated with women, such as
participating in women’s studies

programs—because historically
the best performers in the
company had disproportionately
been men. So the algorithm
looked for people just like them.
Unable to fix that problem, the
company stopped using the
algorithm in 2017. Nonetheless,
many other companies are
pressing ahead.

The underlying challenge for
data scientists is that hiring is
simply not like trying to predict,
say, when a ball bearing will
fail—a question for which any
predictive measure might do.
Hiring is so consequential that
it is governed not just by legal
frameworks but by fundamental
notions of fairness. The fact that
some criterion is associated
with good job performance is
necessary but not sufficient for
using it in hiring.

Take a variable that data
scientists have found to have
predictive value: commuting
distance to the job. According
to the data, people with longer
commutes suffer higher rates of
attrition. However, commuting
distance is governed by where
you live—which is governed by
housing prices, relates to income,
and also relates to race. Picking
whom to hire on the basis of
where they live most likely has
an adverse impact on protected
groups such as racial minorities.

Unless no other criterion
predicts at least as well as the
one being used—and that is
extremely difficult to determine
in machine learning algorithms—
companies violate the law if
they use hiring criteria that have
adverse impacts. Even then, to
stay on the right side of the law,

they must show why the criterion
creates good performance. That
might be possible in the case of
commuting time, but—at least
for the moment—it is not for
facial expressions, social media
postings, or other measures
whose significance companies
cannot demonstrate.

In the end, the drawback to
using algorithms is that we’re
trying to use them on the cheap:
building them by looking only at
best performers rather than all
performers, using only measures
that are easy to gather, and
relying on vendors’ claims that the
algorithms work elsewhere rather
than observing the results with
our own employees. Not only is
there no free lunch here, but you
might be better off skipping the
cheap meal altogether. 

HBR Reprint R1903B

Interviews are where biases most easily show up, because interviewers usually
decide on the fly what to ask of whom and how to interpret the answer.

58 Harvard Business ReviewMay–June 201958 Harvard Business ReviewMay–June 2019

G O L D M A N S A C H S I S A people-centric
business—every day our employees
engage with our clients to find solutions
to their challenges. As a consequence,
hiring extraordinary talent is vital to
our success and can never be taken
for granted. In the wake of the 2008
financial crisis we faced a challenge
that was, frankly, relatively new to our
now 150-year-old firm. For decades
investment banking had been one of
the most sought-after, exciting, and
fast-growing industries in the world.
That made sense—we were growing
by double digits and had high returns,
which meant that opportunity and
reward were in great supply. However,
the crash took some of the sheen off
our industry; both growth and returns
moderated. And simultaneously, the
battle for talent intensified—within
and outside our industry. Many of the

Dane E.
Holmes
Head of
HR, Goldman
Sachs

Expanding the Pool
How Goldman Sachs Changed
the Way It Recruits

candidates we were pursuing were
heading off to Silicon Valley, private
equity, or start-ups. Furthermore, we
were no longer principally looking
for a specialized cadre of accounting,
finance, and economics majors: New
skills, especially coding, were in huge
demand at Goldman Sachs—and pretty
much everywhere else. The wind had
shifted from our backs to our faces, and
we needed to respond.

Not long ago the firm relied on a
narrower set of factors for identifying
“the best” students, such as school,
GPA, major, leadership roles, and
relevant experience—the classic
résumé topics. No longer. We decided
to replace our hiring playbook with
emerging best practices for assessment
and recruitment, so we put together a
task force of senior business leaders,
PhDs in industrial and organizational

THE WAY FORWARD
It’s impossible to get better at
hiring if you can’t tell whether the
candidates you select become good
employees. If you don’t know where
you’re going, any road will take
you there. You must have a way to
measure which employees are the
best ones.

Why is that not getting through
to companies? Surveyed employers
say the main reason they don’t
examine whether their practices
lead to better hires is that measuring
employee performance is difficult.
Surely this is a prime example of
making the perfect the enemy of the
good. Some aspects of performance
are not difficult to measure: Do
employees quit? Are they absent?
Virtually all employers conduct
performance appraisals. If you don’t
trust them, try something simpler.
Ask supervisors, “Do you regret
hiring this individual? Would you
hire him again?”

Organizations that don’t check
to see how well their practices pre-
dict the quality of their hires are lack-
ing in one of the most consequential
aspects of modern business.

HBR Reprint R1903B

PETER CAPPELLI is the George W. Taylor Professor of Management
at the Wharton School and the director
of its Center for Human Resources.
His most recent book is Will College
Pay Off? A Guide to the Most Important
Financial Decision You’ll Ever Make
(PublicAffairs, 2015).

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