Behavioral Economics: Talent-Based Hiring

KEITH ROBERTS

Partner

Gallup Consulting

twincities@gallup.com

http://www.gallup.com/consulting

Topic: Open Column

This installment will address one lever Minnesota’s global business leaders can pull to drive revenue growth, net income, and earnings per share: Talent-based hiring. 

Talent Predicts Success
Talent is a recurring pattern of thought, feeling, or behavior that can be productively applied. It is what we do as second nature — the actions we take, the ways we think, and how we behave. But in the context of recruiting and selection, talent takes on a very specific meaning. 

Talent-based hiring is the principle behind finding the “right fit” for a role. A candidate’s dominant talents can be accessed by comparing their mix of talent dimensions to thresholds defined by the best performers in that role. Talent is scientifically validated to be more predictive of success in a role than competencies (skills, knowledge and experience).  Although talent is foundational, the competency components must also be quantified to expect consistent near-perfect performance.   

Outcomes to Date
Over the past 30 years, Gallup has administered hundreds of selection assessments to nearly 5 million workers across its global client base. More than 730,000 of these assessments have been in sales and sales management. Gallup found that nearly 7 in 10 sales representatives lack the talents to be consistently successful in their jobs. 

One of Gallup’s clients put this premise to the test: Every time a manager recruited a new salesperson, they predicted how well the recruit would perform based on previous experience and their educational background. Based in that evaluation, they ranked the new recruits as "A," "B," or "C" candidates. Each candidate's sales results were then tabulated at 6 months, 12 months, and 18 months. At the end of the first six months, the A candidates slightly outperformed the other two groups. By the 12- and 18-month intervals, this difference disappeared and there was no statistically significant difference between the three groups.

During the same timeframe, Gallup evaluated and ranked the same recruits as a recommend (A), conditionally recommend (B), or not recommend (C). Each candidate’s sales results were also tabulated at 6 months, 12 months, and 18 months. Gallup observed significant differences among the groups at these intervals, with differences becoming even more apparent during the second and third interval. At the end of 18 months, the group identified as A candidates averaged new sales of $218k. The group of B candidates averaged $167k in new sales, and the C group averaged $74k in new sales.

So how was Gallup able to predict a candidate's long-range success more accurately than the managers who interviewed the candidates face-to-face? The answer is simple:  Gallup factored in talent whereas managers focused solely on “gut feel” or the things that reveal themselves in a resume and competency-based interview.

Conclusion
The managers in Gallup’s study evaluated candidates based on how they looked on paper. They looked at each candidate's previous experience, their track records, their educational backgrounds, and the "chemistry” they had with the company.  Gallup, on the other hand, analyzed different criteria and focused on the candidate’s talent dimensions. By selecting someone with the right talents — along with taking into consideration educational background and previous experience — the benefit was increased revenue growth, a more engaged sales force and most importantly a more engaged customer.

Further Information:
For a full white paper on talent-based hiring, please contact twincities@gallup.com.