Knowing What You Don't Know  

Saturday, September 5, 2009

by Joshua L. Schwarz

HR executives should test their assumptions and assess quantitatively the effectiveness of any proposed workplace solutions. A management professor offers a simple -- but costly -- example of what happens when a company rests on its assumptions.

Too often, HR policies are influenced by assumption, assertion by consultants, benchmarking or generalizations from previous experience. Instead, the fundamental notion behind human-capital metrics is that data should be collected and relevant metrics applied to design the best solution to solve management problems.

An example of the value of human-capital metrics came when a large restaurant chain, following the advice of a consulting firm (which developed the selection test), administered the pre-hire assessment to all applicants for restaurant-manageme nt positions.

One goal of the personality test was to measure each applicant's level of extroversion. For a modest fee of $35 per applicant, the consulting firm could, based on the online questionnaire, tell the restaurant chain's HR manager each applicant's extroversion score.

Based on this information, and the assumption that more extroverted restaurant managers would outperform others, the restaurant chain regularly passed over otherwise qualified applicants scoring low in this personality characteristic to hire more extroverted candidates. The problem was, the restaurant firm collected the data but delayed for years the analysis necessary to assess this assumption.

As one might guess, when simple correlations were finally examined (as part of a college class project) between existing restaurant managers' pre-hire extroversion scores and the typical performance metrics on which managers were evaluated, the result was counterintuitive. Those managers who were less extroverted actually outperformed the others.

So, doing this simple analysis could have stopped the firm from hiring the wrong applicants and paying the price.

There is now wide availability of Excel, enabling simple statistical analysis. In addition, HRIS provides the opportunity to mine existing data. HR professionals should test assumptions and assess quantitatively the efficacy of projected solutions to see whether they add real value to the enterprise.

[About the Author: Joshua Schwarz is a professor of management at the Farmer School of Business of Miami University.]

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