For 2 decades, I have made a living deploying mathematical models to find hidden value in the securities markets. This is a difficult problem because these markets are very efficient, meaning that it’s very hard to do better than just showing up and stating your needs. Consider the stock market: If you want to buy a share of Microsoft stock, you can have your order filled within seconds, knowing that you are within a penny or two of the best price on the planet and that every share is identical to every other one.
On the other hand, you can spend months looking for the best house, because the real-estate market is inefficient. Each house is different, and you won’t fully understand your needs until you begin looking. Your reward for investing time in the search is the pleasure of living in a much better house than one you could find in an afternoon.
As employers, we are also in the market for human capital, which is even less efficient than the real-estate market. Many of the best people are almost impossible to find.
Searching résumé databases is tedious and yields few qualified candidates who are available right now. Recruiters are expensive, often add little value, and shy away from recent graduates and the unemployed. College placement offices are more interested in getting us to their career fairs in May than in finding candidates who meet our current needs.
Even the most targeted ad generates a flood of résumés from people who have not researched our company or prequalified themselves. Who can blame them? Employers often treat hiring as a process of elimination in a numbers game. A day spent researching a firm, crafting a letter, and customizing a résumé is wasted when a hiring manager or human resources (HR) person spends only a few seconds glancing at them.
Yet an inefficient labor market isn’t such a bad thing for those who are willing to dig a little deeper. Such a market can reward well-spent effort in ways that efficient markets don’t. I would like to share with you some of the ways my colleagues and I have approached hiring in a rather dysfunctional labor market.
We begin by advertising as broadly as possible—with a very general job description—hoping for a flood of résumés, which we immediately ignore.
Instead of poring over each submission (or scanning each one for 9 seconds), we automatically respond to everyone with an extensive description of our group, the firm, our industry, our needs, career prospects, physical location, commute, work hours, and so on. We avoid selling ourselves and err on the side of full disclosure, with particular emphasis on the problems and risks we face. In short, we arm our applicants with the information they need to eliminate us from their consideration.
We close by asking those who are still interested to write a letter making their case.
As we wait for their responses, we read those résumés as time permits, looking for exceptional candidates who we fear might not take the next step. We send them encouraging notes saying things such as, “Have you thought about how the Principal Components Analysis you’ve done might apply to stock market data?”
Typically, 10% to 15% of initial applicants send the requested follow-on letter. Of those, perhaps half make a case worth investigating.
We still might have a dozen or more candidates, so rather than scheduling interviews, we might hold an open house with beer and pizza or some other ice-breaking activity. Most appreciate the fact that we give everyone a chance to visit rather than eliminate three-quarters of them based on a résumé and a letter. We encourage them to talk to each other and swap job leads. This allows us to see how they interact.
Some tips on hiring
- Cast a broad net. Describe your needs in general terms and advertise widely with the goal of drawing a large candidate pool. Although targeting your search does narrow the field, it runs the risk of eliminating good candidates due to your own lack of imagination.
- Don’t require exceptional sales skill or a great-looking résumé. Great presenters might not be the best workers (at least not in my business, in which we mostly do and seldom present).
- Help candidates reject you. In the days of manual typewriters and snail mail, people put more effort into deciding they weren’t interested in you. Now that a mouse click drops their résumé into your in box, you need to take the lead and honestly disclose the necessary information and then explicitly ask them to reconsider applying.
- Don’t judge people too early. First impressions are hard to overcome—and often wrong. You might discover a candidate who makes up for a weak point with a talent you hadn’t anticipated needing. Our best hires seldom had the best-looking résumé or cut the best image.
- Observe your candidates learning something. Why require 2 years’ experience with a piece of equipment you can teach them to use in 2 days? If your candidates will allow you to teach them before you make a hiring decision, you’ve identified people who value learning, and you’ll be able to make a more informed choice.
- Show, don’t tell. Have candidates spend time at the job, not just talking about it.
- Try to help those you don’t hire. Your paths might cross again someday. Your network will appreciate it. Your employees will admire you for it.
- Expect to be misunderstood. Expect a few people to send you a screed on why they are the best candidate and don’t need to prove it to you or anyone else, and besides, it is your job to choose them, not the other way around. Don’t get upset by these people. And don’t hire them.
- Treat people as though they’re humans, not “resources.” They aren’t oil barrels or pork bellies; they have feelings. People realize there is competition and they can handle rejection, but they hate not knowing where they stand. If you keep the ball in their court, they will feel more in control and less helpless–and thank you for it.
If we have a need for specific skills, we schedule technical interviews a few weeks hence. We explain that even if they don’t posses a specific skill at the moment, we’re happy if they learn it between now and then.
In some cases, we might provide study materials, and in a few cases, we’ve held free, formal classes of between a few days’ and a few weeks’ duration. We care more about how well people understand our questions and research answers than we do about their prior knowledge.
In one case, after about a dozen students had worked intimately on a very difficult problem, I began by asking each of them, “If you were me and you could only hire one person from this class, and it couldn’t be you, who would it be?” Everyone except Orlando said “Orlando,” and we hired him. He has proven to be an exceptional employee even though we would never have considered him based on his résumé alone.
Next, we invite our top candidates to come in individually for a full day. We don’t load them up with interviews but ask them to follow us around to get a feel for the environment, our people, and the job. The day ends with our first traditional interview, except that now we can all explore the possibility of a match based on shared experience rather than assumption and imagination.
This approach usually identifies a small group of exceptional candidates. We hire the ones we need. We might refer the other top candidates to other parts of our firm or other firms in our professional network. Because all the candidates have worked hard to offer us such excellent choices, we want to reciprocate.
All this takes more effort than asking HR to send up three résumés and picking one. Yet, because we allow our applicants to self-select, then give even unlikely candidates a shot at proving themselves, it’s a very efficient method. The return comes in the form of better employees who offer value that previously was hidden.
We think the world will be a better place when more people take a more innovative approach to discovering hidden value during the hiring process. So, if you find these suggestions interesting, pass them around. Even if you are not a hiring manager, suggest them to someone who is. Leave a copy in the printer tray, post it on a bulletin board, or e-mail a link around. Meanwhile, see the list of specific suggestions in the list above.