Recruiting experts and leaders of the executive search firm ECA Partners, Atta Tarki and Burt Francis reveal strategies for hiring the best people for their job.
Thirteen STEM jobs were posted online in 2016 for every STEM job seeker. Demand for artificial intelligence specialists – the current golden goose of the tech world – is fueling a recruitment arms race, with salaries for graduates and PhDs ranging up to $500,000. As the CEO of one AI company characterized the current talent market, “there is a mountain of demand, and a trickle of supply.”
With companies of all kinds competing more aggressively for an edge in their markets, talent acquisition strategies have become less about filling open roles and more about finding, and hiring, superstars. And yet, despite obligatory proclamations that ‘people are our greatest asset,’ most companies have done little to show they actually mean it. While hypothesis driven and evidence-based practices have infused and upended most other dimensions of business, the typical HR department’s recruiters still fall back on intuition and “tried and true” approaches that remain untested and unproven.
The top companies that are investing and innovating in intelligent, evidence-based hiring have already separated themselves from the pack, gobbling up talent share in their markets and raising the bar for everyone else. Their strategies and approaches merit close study and emulation by those looking to catch up.
It’s well known that the e-commerce giant is hyper-focused on engineering every aspect of its business for efficiency and scale, including its hiring methods. With a global workforce now topping 600,000, double what it was just two years earlier, Amazon has had to grow aggressively without compromising the relentlessly high standards Jeff Bezos has declared to be “a big part” of how they stay ahead of customer expectations. How do they do it? According to interviews with former Amazon executives, the company relies on a data-driven process they incubated and tested for three years before fully rolling it out in 2017.
Vet candidates with objective, skills-based testing
After an initial step of sorting through resumes – a process previously handled by an AI tool until it had to be scrapped due to inherent gender bias – worthy engineer candidates are screened and ranked using objective, skills-based coding tests. Non-engineers are put through similar paces with case simulations based on real-world business examples. These tests, developed and refined by SWAT teams of Amazonians, help the company filter out the bottom tier of applicants objectively and efficiently so valuable interview time isn’t wasted. Conversely, by taking human bias out at this stage, they also reduce the risk of eliminating worthy candidates too early.
Raise the bar on the interview process
Candidates who get past tests and phone screens face a committee of five, anchored by a “bar-raiser” from outside the functional area. Selected from the ranks of Amazon’s top performers, the bar-raiser holds ultimate veto power and is there to ensure standards aren’t compromised in the rush to fill a critical role. “We’re looking for someone who’s better than half of the people currently working here at that level,” said the company’s vice president of worldwide people operations in characterizing the principle of bar-raising. As interviews are conducted, blind voting by committee members helps avoid the all too common scenario of early interviewers tainting the perspectives of later ones.
Create feedback loops and predictive models
Amazon’s greatest innovation may be in creating a continuous data-rich feedback loop to inform predictive hiring models. Once on board, every employee has a job performance profile that’s an aggregate of their annual review and ranking plus whether they were promoted and how quickly. That vast body of data is processed with machine learning and used to inform and guide the screening process. As one former Amazon executive described a typical feedback loop, “You can bring all of those data points together and say, okay, what we find is that people who scored below a three on this assessment, 86 percent of them didn’t get through the interviews, and of the 14 percent of them that did get an offer 10 percent of them accepted, and of those that accepted, 8 percent of them were managed out within the first two years.” In this way, the company’s recruitment engine is designed to get smarter and more efficient over time.
The artifact that perhaps best conveys Netflix’s obsession with company culture is their 125-slide “culture manifesto” first published in 2009 by CEO Reed Hastings and since evolved into a section of the company’s career website. While most companies pay lip service to the importance of culture to their mission, very few walk the walk as thoroughly and systematically as Netflix. Behind this commitment is a professed belief (enshrined on slide 37) that “In procedural work, the best are 2x better than the average. In creative/inventive work, the best are 10x better than the average, so huge premium on creating effective teams of the best.” Ten years later, Netflix’s approach to talent and culture remains steadfast in its focus on “creating effective teams of the best.”
Reject folk wisdom
A popular trick to hiring for cultural fit is something called “the beer test,” which involves the hiring manager asking, “Would I enjoy having a beer with this candidate?” When we asked Patty McCord, the former chief talent officer of Netflix and the author of Powerful what she thought of this idea, she rejected it outright. “What if the job isn’t about drinking beer?” Instead of buying into generic tricks and truisms, Netflix has carved out a unique set of time-tested values that they use to identify and hire for fit. Instead of just espousing the importance of integrity, for example, they make it real and specific: “You admit mistakes freely and openly.” By being explicit about their values they are able to use culture to attract the right talent and get the best out of those they hire.
Know your culture, hire for fit
Defining company culture is as much about stating what you are not as stating what you are. Netflix is clear that they don’t strive to be a family. Instead, they model themselves on being a dream team, where everyone brings their A-game and raises the performance of their colleagues. As CEO Reed Hastings explained in a recent podcast, “Just as great sports teams are constantly scouting for new players and culling others from their lineups, our team leaders would need to continually look for talent and reconfigure team makeup.” Being unapologetically honest and about its culture and embedded values allows Netflix to hire and reward those who are a good fit.
Align policies with principles
It’s one thing to say you’re building a dream team and a high-performance culture. It’s another to have policies that back up these principles. Flouting convention, Netflix sees retention as an irrelevant metric for them. As McCord states, “retention is a terrible measure for quality of hires. You won’t build a high performing team if you incentivize your recruiting team to hire for retention.” To retain and reward the best and brightest, Netflix avoids prescriptive annual raises and bonuses. Instead, the company simply pays employees at the top of their personal market, estimating annually the maximum they might make at a competing firm and adjusting pay accordingly.
The concept of competitive advantage is taught in every business school, and yet talent is rarely singled out as a key resource to compete over. It’s no coincidence that the companies, such as Amazon and Netflix, that are dominating and upending their respective markets are near-obsessive in their focus on talent. They’ve turned the truism of people as “greatest asset” into an evidence-based, sustainable and winning strategy.