Job market signalling favours the privileged.
If companies want to find an edge when searching for talent, they need to stop following signals blindly and start looking in places that others aren’t.
Matching talented people into suitable jobs is fiendishly hard. It is why large companies employ armies dedicated to talent acquisition, engage proactively with recruitment firms, and use exclusive head-hunters for top jobs.
But resources in any firm are stretched and – whether consciously or not – we routinely use shortcuts or heuristics when making hiring decisions.
As sociologist Dr Louise Ashley puts it in her recent book, Getting the ‘Right’ People Into the ‘Right’ Job is extraordinarily complicated.
Accents, cultural and social affinities, and many other mental shortcuts come into play.As they attempt to do so, managers deploy a variety of values which may not be meritocratic, though impressions otherwise can have a powerful legitimating function, to protect the unequal status quo.”
Michael Spence is a Nobel prize-winning economist and is noted for his job-market signalling model. He argues employees ‘signal’ their skills to prospective employers through the monetary and time cost of greater levels of education.
This is fairly uncontroversial. Employers pay higher wages to employees with higher levels of educational attainment because they know that, broadly speaking, these individuals have higher ability levels.
It doesn’t even matter if the education has any intrinsic value; all that matters is whether the signal conveys the right information – i.e., higher education equals increased ability.
The model – employed by firms throughout our industry and far beyond – does an ok job. For entry- level candidates, it probably conveys the right information about ability the majority of the time.
But it is not without its downsides.
What about the times where it doesn’t work? What proportion does that account for and what level of talent is being left unfulfilled?
Education, of course, is also just one proxy we use for assessing candidates’ appropriateness and skill levels.
There is always room for profitable, lead-based surprises to be found in the noise.Accents, cultural and social affinities, and many other mental shortcuts come into play, which further compound the career barriers erected in front of many job-hopefuls from lower socioeconomic backgrounds.
Hiring for ‘fit’ can be a slippery DEI slope.
Tyler Cowen and Daniel Gross understand this. In their latest book Talent they critique current recruitment practices and challenge simplistic notions of intelligence and personality tests.
They also highlight the importance of considering minority groups when hiring and promoting – including gender, ethnicity, race, disability, neurodiversity among many other traits.
According to them: “Most of us have a bias toward well-spoken and articulate storytellers." They warn readers to stay alert to this bias as it can “cause you to hire glib but unsubstantial people and overlook rare creative talent.”
Come on, feel the noise
Nate Silver’s best-selling Signal and the noise book is standard reading for anyone trying to predict future outcomes. Hiring decisions fall squarely within this bracket.
However, reading Silver too closely or literally can be dangerous. “The signal is the truth. The noise is what distracts us from the truth.”
Well yes, and no. This assumes that your model – mental or otherwise – is perfect. And as the statistician George Box so beautifully reminds us, “All models are wrong, but some models are useful.”
For those willing to put the extra effort to understand why, how and where our hiring models are wrong, there lies a huge opportunity. Just as with advertising, there is value in the wastage.
In marketing terms, there is always room for profitable lead-based surprises to be found in the noise.
In talent terms, we could think of these deficiencies in job-market models as overlooking the ‘dark horses’, or hidden gems.
So as with so many things in life, when the signals fail you have to go looking in the noise.
James Whiteman is co-chairperson of the social mobility workstream at Diversity Project
