Evaluating Placement Information (Part 3 of 3)

Skillfully evaluating information to place ability at best-fit will tend to have three parts: analysis, psychology, and constraints. Accommodating any one of these in a placement process isn’t easy. Being good at all three is rare. Let’s look at the constraints part below and tie up this series of posts.

The Constraints 

The third part of a skillful evaluation addresses constraints. The most important job for principals (i.e. the talent seekers and candidates) here is to manage recruitment risks, or the risks that arise because agent-actors (i.e. placement facilitators) may have interests that differ from those of principals. For example, placement facilitators who are fully paid or credited as of a candidate’s hire date may unwittingly employ conservative strategies associated with top-down recruiting initiatives versus understanding the true growth opportunities represented by the relevant edges of recruiting. More to the point, they might, aggressively market candidates who behave similar to a stereotyped benchmark.

I make this point by distinguishing between the profession and business of agency. The profession is about recruiting talent so as to maximize long-term returns, while the business of recruiting or agency is about earning rewards in the short-term. Naturally, current viability is essential to support the profession. But when a placement facilitator emphasizes the business at the expense of the profession, principals are not best served. Rather, facilitators should concentrate on helping principals find matches that provide sensible balance, relevant diversity, and are under priced. This requires going against the consensus and being willing to appear very different from the pack.

John Maynard Keynes, the renowned economist and investor, wrote about this in The General Theory of Employment, Interest, and Money, published in 1936. He discusses the conduct of a long-term investor: “For it is in the essence of his behavior that he should be eccentric, unconventional and rash in the eyes of the average opinion. If he is successful, that will only confirm the general belief in his rashness; and if in the short run he is unsuccessful, which is very likely, he will not receive much mercy. Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally.”

As Keynes suggests, the risk of losing credibility as a placement facilitator for straying too far from convention is important. As a result, facilitators will often strive to be different enough to succeed but not so different as to be considered unconventional. The reason is that they are often inappropriately judged by short-term performance. Likewise, a principal who makes a conventional decision that turns out to be wrong can fall back on the argument that the decision process was usual, even if uninspired, and hence the outcome was based on something unavoidable. A principal who makes a correct but unconventional decision that ends badly is exposed to criticism and the risk of losing credibility.

In hiring, the trend toward conformity is clear. It seems to me that workforces today look more like their stereotyped benchmarks than they did thirty years ago. Just as we see in investment portfolios the measure of how different a mutual fund portfolio is compared to its benchmark, has fallen from 75 percent in 1980 to about 60 percent in 2010 in the United States. Too many leaders in ability placement markets as well as in business fear straying too far from convention, even in cases where the convention isn’t all that great.

Because all three parts to skillfully evaluate placement information are difficult, they stand in the way of great long-term performance. Some can succeed in one or two of those areas, but very few can master all three. This fits with the conclusion of an analysis of skill and luck in hiring: only a handful can surmount the analytical, psychological, and constraint obstacles. The same is true in financial investing which provides an excellent analog to learn from.

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