Identifying Talent Through Technology - MSPB

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Identifying Talent through TechnologyAutomated Hiring Systems in Federal AgenciesA report to the President and the Congress of the United Statesby the U.S. Merit Systems Protection Board

Identifying Talent throughTechnologyAutomated Hiring Systems inFederal Agencies

LETTER FROM THE ACTING CHAIRMANU.S. Merit Systems Protection Board1615 M Street, NWWashington, DC 20419-0001August 2004The PresidentPresident of the SenateSpeaker of the House of RepresentativesDear Sirs:In accordance with the requirements of 5 U.S.C. 1204(a)(3), it is my honor tosubmit this Merit Systems Protection Board report, “Identifying Talent ThroughTechnology: Automated Hiring Systems in Federal Agencies.”The placement of “Strategic Human Capital Management” as the first of fiveGovernmentwide initiatives in the President’s Management Agenda clearlyacknowledges the critical importance of a capable, trained, and motivated Federalworkforce. One aspect of attaining such a workforce is recruiting and selectinghighly qualified employees. Federal agencies are looking to informationtechnology to help them in this endeavor and are making increasing use ofautomated hiring systems to announce jobs, receive applications, and identifypromising candidates. Consequently, automated hiring systems change howagencies assess job applicants. Because this assessment has significantimplications for the quality of the Federal workforce, MSPB conducted a study ofhow Federal agencies are using these systems.We found that automated hiring systems can be beneficial to both agencies andjob applicants, when used wisely. These systems can help agencies streamline theapplication process, assess applicants fairly and thoroughly, and reduce hiringtime. However, we also found that investments in information technology alonedo not guarantee these results. Agency leaders must also invest time and moneyin implementing an automated hiring system to ensure that selection criteria and

assessment methods are valid and effective. Federal managers and humanresource professionals must also continue to identify assessment criteria, selectand use appropriate assessment tools, and exercise informed judgmentthroughout the hiring process. The report provides recommendations to agencieson how they can use automated hiring systems most effectively andrecommendations to the Office of Personnel Management on steps it can take tosupport such use.I believe you will find this report useful as you consider how to shape and managethe highly qualified Federal workforce required to meet the challenges of the 21stcentury.Respectfully,Neil A. G. McPhie

U.S. Merit Systems Protection BoardNeil A. G. McPhie, Acting ChairmanSusanne T. Marshall, MemberOffice of Policy and EvaluationDirectorSteve NelsonDeputy DirectorJohn Crum, Ph.D.Project TeamJames TsugawaHarry C. Redd III

Executive SummaryIntroductionThe Business Case for Good AssessmentParticipants in the Hiring Process and Their RolesResearch QuestionsStandards for Merit-Based HiringAutomation Objectives and InitiativesResults and Agency ExperienceSummary and ConclusionsRecommendationsAppendix A—An Overview of the Federal HiringProcessAppendix B—A Brief Discussion of Selection ToolValidityAppendix C—How Automated Hiring SystemsPerform AssessmentsAppendix D—An Overview of “Multiple Hurdles”Appendix E—List of Recommendations Linked toAutomation Success FactorsAppendix F—An Argument for Competency-BasedQualification Standards

Executive SummaryFederal agencies are making increased use of automated hiringsystems. This use reflects several factors, including the increasingpower and availability of information technology, a desire to reducetime to hire, and the prospect of increased efficiencies. The automatedhiring systems that agencies are using are much more than electronicfiling cabinets for “virtual resumes.” These systems have materiallychanged how agencies recruit, receive applications, and assess and referapplicants for Federal jobs. For this reason, the U.S. Merit SystemsProtection Board (MSPB or the Board) conducted a study to betterunderstand these systems, their use in the Federal Government, andthe effects of that use.This report discusses how automated hiring systems work, theircapabilities and limitations, and how Federal agencies use thesesystems to assess job applicants. The report is not a “report card” onspecific automated hiring systems or their providers, but discusses howautomated hiring systems can be used in the hiring process,particularly to help identify and select the best person for the job.Below, we provide an overview of our major findings.The Technology Automated hiring systems have a place in Federal hiring—butonly if used wisely. Automated hiring systems can be used to identify a pool ofpromising candidates. However, people must still determine whatattributes automated hiring systems will measure, determine howthese systems will measure those attributes, monitor theoperation of these systems, and make selection decisions. Automated hiring systems can contribute to materialimprovements in the hiring process. The use of automated hiring systems is not only desirable, butincreasingly necessary. There is no realistic alternative; manual,

paper-based hiring processes are too burdensome, labor-intensive,and costly to be practical on a large scale.Results AchievedOur interviews and site visits revealed varying results. Some Federalagencies have achieved good results with their automated hiringsystems. Those agencies have increased access to job opportunities,simplified the application process, and reduced time to hire whilemaintaining or improving the quality of new employees. Otheragencies have struggled to obtain even acceptable results. All agencieshave understood—or soon learned—that it takes vision, planning,expertise, and resources to use an automated hiring systemsuccessfully.Using Automated Hiring Systems EffectivelyAs stated above, the key to whether automated hiring systems arebeneficial is wise use. Whether automated hiring systems contributepositively to Government performance does not depend on thetechnology itself. It depends on how Federal agencies use thattechnology, and whether the leaders of Federal agencies make theinvestments in recruitment, assessment tools, and people needed to usethe technology effectively.Effective use begins with an accurate understanding of the importanceand nature of the hiring process. It is imperative that leaders in theFederal Government recognize that: Hiring decisions have long-term consequences for organizationalperformance; Good hiring decisions depend on good assessment. Goodrecruitment and good intentions are necessary but not sufficient; Good assessment requires valid selection criteria andmeasurement tools; and

An effective hiring process requires managers and humanresources (HR) professionals who understand and are able toperform their respective roles in that process.Table 1 summarizes our recommendations to Federal agencies and theU.S. Office of Personnel Management regarding the use of automatedhiring systems and the overall hiring process. The body of the reportprovides the rationale for these recommendations, and theRecommendations section of this report discusses eachrecommendation in detail.

SubjectLeadershipDesigningthe HiringProcessTable 1. Summary of RecommendationsRecommendations for Agencies1. Manage hiring as a critical business process.2. Manage the introduction of an automated hiringsystem as an organizational change initiative.3. Invest appropriate resources in the design,implementation, and operation of the hiring process.4.5.6.Implementing 7.an Automated8.HiringSystem9.Use automated hiring systems to support recruitmentprograms, not to replace them.Design a hiring process that emphasizes selectionquality over less-important outcomes such as costand efficiency.Evaluate existing assessment tools before automatingthem.Invest in “content”—selection criteria and methodsfor assessing applicants against those criteria.Communicate roles and expectations to linemanagers, HR professionals, and applicants.Ensure the competence of HR professionals.OperatingPractices10. Adopt documentation requirements that balanceapplicant burden and agency risk.11. Adopt quality control measures to ensure accurateratings and referrals.12. Use “triage” to manage volume.13. Systematically evaluate and improve the hiringprocess.SubjectPolicyRecommendations for OPM14. Establish (1) a core document that applicants can useto apply for jobs in different agencies; and(2) Governmentwide “applicant service standards.”15. Move toward competency-based qualificationstandards.LeadershipWe conclude this overview by noting that an effective hiring process isa necessity, not a luxury. As one senior Federal official recentlyobserved, Federal agencies cannot meet their workforce needs by fillingjobs as quickly as possible with “warm bodies”:Recruiting and hiring the mostqualified individuals takes time, but is

critical to the [Securities andExchange] Commission’s success.We have refused to hire employeessimply to fill chairs, but rather arefocused on hiring the best and mostappropriate people to fill theseimportant positions, and are keenlyfocused on where each staff person cando the most good.1Nor can Federal agencies afford to abandon the “war for talent,” relyingsolely on contractors, other levels of government, or otherorganizations to hire and provide the talent needed to manageGovernment programs and deliver public services.

IntroductionThis report describes how agencies are using information technology inthe hiring process, especially to assess job applicants. Thus, when werefer to “automation,” we are referring not only to informationtechnology and automated hiring systems, but also to Federal agencies’use of that technology.2Automation has a significant and expanding rolein the Federal hiring process.Federal agencies were slow to introduce automation to their hiringprocesses,3 but progress has been swift. When we began this study inFebruary 2002, we found substantial variation in agencies’ use andunderstanding of automated hiring systems. The scale ranged from“interested in learning about automated systems” to “implementing anautomated system” to “experienced.” Most agencies were at the lowerend of the scale; very few were at the higher end. By the time wecompleted our initial information gathering, most large Federalagencies were actively considering or using one or more automatedhiring systems.4 This shift is permanent. Manual, paper-based hiringprocesses are rapidly losing ground and will not regain it. Moreover,the role of automated hiring systems is expanding. Agencies do notsimply use them as “electronic filing cabinets,” but also use them toassess applicants—to make substantive decisions about applicants’qualifications and to make distinctions among applicants. For thesereasons, it is in agencies’ and the public’s interest to ensure thatautomated hiring systems are at least as effective as the paper-basedhiring systems they replace.

Table 2. Major Steps in the Federal Hiring ProcessStepActionDefine the job and conduct a job analysis to identify job1requirements.Select assessment tools.2Develop a rating procedure—a method for distinguishing3among qualified applicants.Recruit, publicize the job, and receive applications.4Review applications for legal requirements.5Assess minimum qualifications—determine whether applicants6meet minimum requirements.Assess relative qualifications—make distinctions among7qualified candidates.Issue a list of candidates to the selecting official.8Assess candidates.910 Select a candidate (or candidates).Hiring includes many steps that can beautomated.Automated hiring systems can do many things; for example, they candistribute job information electronically, receive on-line applications,assess applicants, notify applicants of the outcome of the hiring process,and eliminate much human labor. As shown in Table 2, hiring typicallyinvolves many steps and decision rules and much complex information.We provide a fuller description of the Federal hiring process and itsterminology in Appendix A.Our primary focus in this report is assessment itself: how agencies usetechnology to evaluate applicants’ qualifications. We emphasize thefunction (assessment) over the means (technology) for two reasons.First, because technology is evolving rapidly, a report that simplycatalogued and rated the features of individual automated hiringsystems would be obsolete by the time it was published—if not before.Second, it makes little sense to examine automated systems apart fromthe underlying hiring process, particularly the key step of assessmentof qualifications. Automated hiring systems are a means to an end, andonly have value if they help agencies refer and select the best

applicants. As we discuss in this report, automated hiring systemsclearly can help agencies do this, a significant achievement given thedemands of Federal hiring processes. Yet the outcomes of automationultimately depend very little on the technology and largely on thequality of the underlying assessment processes. Until an organizationis certain that it can consistently distinguish the best candidates fromgood candidates, and good candidates from mediocre (or unqualified)candidates, automating the hiring process is a waste of time and othervital resources.Accordingly, this report not only discusses how automation can be usedto support assessment of applicants, but also outlines criteria for soundand fair assessment. The report also makes recommendations aboutassessment and related aspects of the hiring process.Automated hiring systems can support forms ofhiring other than competitive examining.When conducting this study (for example, when interviewing agencymanagers and HR professionals), we usually discussed automation andassessment in the context of competitive examining,5 becausecompetitive examining is the standard means of entry into thecompetitive civil service.6 Competitive examining is also procedurallydemanding, because agencies must follow rules governing theannouncement of job vacancies; receipt of applications; referral, contact,and selection of candidates; and maintenance of records.7 Thus,competitive examining is an excellent test of an automated system’sability to support other, less procedurally complex forms of hiring, suchas merit promotion. Nevertheless, in a merit system, all forms ofhiring—whether internal (such as merit promotion) or external,competitive service or excepted service—involve assessment.Therefore, our findings and recommendations have relevance for allforms of hiring and for all agencies.Automated hiring systems are evolving.The systems we covered in this study have changed since our datagathering began, and will continue to change. Agencies may also adoptentirely new automated hiring systems, modify their systems and

processes, or use existing systems in new ways. In addition, Federalhiring rules and processes are always subject to change. For thesereasons, our observations and conclusions cannot be the final word onautomated hiring systems or agencies’ use of those systems.Nevertheless, this report provides a reasonably accurate description ofthe fundamental capabilities and characteristics of automated hiringsystems with respect to their relevance for Federal agencies. Thisdescription should remain relevant and usable for at least a few years.Restated, we expect evolution, not revolution. We learned of no majortechnological breakthroughs on the horizon, and we anticipate thatagencies will direct their efforts to implementing and effectively usingexisting technologies instead of pursuing new and unproventechnologies.

The Business Case for GoodAssessmentAssessment matters.In a merit system, assessment—by which we mean evaluation of acandidate’s ability to do a job—determines who is actively consideredfor a job, and who is ultimately selected for a job. And, as noted below,selection decisions are critically important:Results of wise decisions can rangefrom the mere absence of problems togenuinely excellent outcomespromoting organizational purposes.Cumulative effects in hiring decisionscan result in substantial increases inmean performance levels andproductivity. Consequences of unwisedecisions can range frominconvenience to disaster.8The benefits of a good selection are not merely theoretical.9 A recentstudy by the consulting firm Watson Wyatt Worldwide suggests thatselecting highly qualified candidates is not only consistent with meritprinciples, but profitable. The company surveyed the human capitalpractices of over 400 private-sector companies and found thatcompanies that hired workers well-equipped to perform their jobscreated more value for their shareholders than did less-selectivecompanies.10Conversely, the costs of a poor selection are also real. As shown inTable 3, one organization estimates that a poor selection can cost aprivate sector company as much as three times the employee’s annualsalary.

Table 3. Estimated costs of hiring the wrong personType of EmployeeEstimated CostsEntry-level full-time employee 5,000 to 7,000 20,000/year FTE 40,000 100,000/year FTE 300,000Note: Costs include wasted salary, benefits, severance pay, headhunter fees,training costs, and hiring time.Source: Corporate Leadership Council, Literature Review, “Employee SelectionTests,” Catalog No. 070-198-213, Washington, DC, March 1998, p. 2.Previous Board studies document additional costs borne by Federalagencies that make a poor selection decision. Federal agencies do nothave the option of simply terminating a poor performer and “startingover,” unless the employee is serving a trial or probationary period, andthe available alternatives are costly.11 Adverse action (i.e., demotion ortermination) will require substantial management attention and stafftime. The remaining options—remediation or inaction—are alsocostly. Remediation entails a potentially lengthy period of reducedproductivity: the organization must devote resources to training andcounseling the employee while coworkers (or managers) fix or performthe employee’s work. Inaction means that the agency will bear thecosts of a poor selection indefinitely and may also harm productivity:* * inaction can create problems farbeyond that of a single incompetentworker. It can turn the [work] unit’sbetter performers into overworked,resentful employees who, noticing theabsence of penalties for inferiorperformance, may reduce their ownefforts as a result.12Good selections require goodassessments.Agencies can significantly improve the likelihood of selecting goodemployees by using assessment methods with high validity. Validity isthe ability of an assessment method to predict on-the-job performance.

(Appendix B provides a fuller discussion of the concept of validity.)Good assessments, used wisely, are particularly important for agenciesthat conduct competitive examining, a process that is notablyunforgiving. Competitive examining demands precision, because anagency must be able to identify a small number of promising candidatesfrom a pool of tens or hundreds of applicants. Such examining alsodemands accuracy, because an agency must not only identify the bestapplicants, but also provide special selection consideration to certaincategories of applicant.13 Failure to do so may legally compromise anyappointment(s) made; there is no tolerance for error. Managers alsohave little tolerance for error. For example, a manager will not bepleased if the best applicant for a position cannot be selected becausethat applicant was not rated accurately.14Assessment methods are not all created equal.As illustrated in Figure 1, some assessment methods are more validthan others.15 The most valid methods, such as work sample tests andmental ability tests, make useful distinctions among applicants andprovide valuable, if imperfect, predictions of on-the-job performance.The worst methods, such as cataloging applicant’s interests (“Do youlike helping people?”) and graphology (handwriting analysis), areuseless: they provide no insight into an applicant’s ability to perform.The Validity of Selected Assessment Methods16Work sample tests0.54Structured interviews0.51Mental ability tests0.51T&E (behavioral consistency)0.45Unstructured interviews0.38Biographical data measures0.35Reference checks0.26T&E (years of job experience)0.18T&E (point method)0.11Interests0.10Graphology0.02

Ratings of training and experience can be usefulor useless.Most agencies use ratings of training and experience (T&E) to screenand refer applicants. This is understandable: most OPM qualificationstandards contain explicit experience requirements (and sometimes alsoeducation requirements), and the resume—the closest thing to auniversal application form—is essentially an applicant’s description ofhis or her training and experience. And Federal supervisors, by choiceor by default, rely heavily on training and experience when makinghiring decisions.17Yet Federal agencies’ reliance on T&E is not evidence of its validity.Figure 1 shows that the validity of a T&E rating depends on how thatrating is done. The best method, known as behavioral consistency, hasa validity of 0.45, good enough to be useful. This method isinformation- and labor-intensive: applicants must provide detaileddescriptions of relevant behaviors and accomplishments, and theemployer must evaluate those behaviors and accomplishments againstpreestablished benchmarks. The least valuable method, the “pointmethod,” assigns points based on an applicant’s years of experience,years of education, educational credentials (e.g., degrees), and the like.The point method is fast, simple, and—unfortunately—pointless.The implications are clear for any agency seeking to use automation inthe hiring process. First, the referrals produced by an automatedsystem will be only as good as the underlying assessment method(s).Second, any agency that plans to use an automated hiring system torate training and experience must pay attention to how the system willmake those ratings to ensure that they are valid and useful.

Participants in the HiringProcess and Their RolesThis section lists the major participants18 in the Federal process, witha focus on assessment, and describes their roles and responsibilities.We do this (1) to help the reader better understand the hiring processand our findings; (2) to emphasize that effective, timely hiring is ashared responsibility; and (3) because our findings andrecommendations are relevant to all these participants.The division of labor we describe below is illustrative. Agencies maydelegate responsibilities and assign tasks differently. That does notaffect our main point: that the responsibility for good hiring decisionsdoes not lie solely with HR. The hiring process, no matter howtechnically sound or technologically advanced, cannot succeed withoutthe support and cooperation of all participants, including agencyleadership, line managers, HR managers and staff, OPM, andapplicants.Agency Leadership.“Agency leadership” refers to high-level management (the executivelayer at the top of an agency, bureau, or major installation). It isaxiomatic that agency leadership is responsible for the success orfailure of the agency’s programs. Agency leadership is equallyresponsible for the success of supporting functions such as finance,information technology, and human resources.These individuals are rarely, if ever, directly involved in the assessmentand selection of line employees other than those on their immediatestaffs. Yet they are critically important to the process. They createhuman capital goals and plans; they set priorities and expectations forthe HR function; they allocate resources to HR functions (such asrecruiting and assessment); and they establish expectations for linemanagers. For the critical step of assessment, agency leaders decidewhether assessment is important and whether to spend the time,money, and “political capital” needed to do it well.

Line ManagersLine managers19 are directly involved in assessment and selection. Asrepresentatives of management, line managers define jobs; identify theknowledges, skills, and abilities (KSA’s) or competencies important tothe job; and participate in the development of rating procedures. Assupervisors, line managers conduct interviews and reference checks andrecommend or select new employees. Automation does not relievemanagers of these tasks, although it can support these tasks andeliminate repetitive work. In fact, automation makes these tasks moreimportant, because automated hiring systems, unlike human beings,cannot “work around” a deficient job analysis or rating procedure. Norcan these systems identify and deal with applicants who misstate orfalsify their qualifications.HR ManagersHR managers have two distinct roles in the hiring process. Asfunctional managers, they oversee the design, development, andapplication of staffing policies and assessment procedures. As linemanagers, they select, train, and evaluate the HR professionals whowill advise line managers on staffing issues, develop and use assessmenttools, and interpret and apply staffing policies.HR ProfessionalsHR professionals are responsible for the day-to-day operation of thehiring process. They coordinate recruiting activities, conduct jobanalyses, prepare and post job announcements, assess and referapplicants, and respond to applicant inquiries.20 In most agencies, HRprofessionals are also the “end users” of the automated hiring system.21The timeliness and quality of the hiring process—and consequently thequality of new employees—depends on their expertise, technologicalcompetence, and responsiveness.

The Office of Personnel ManagementOPM regulates Federal civilian employment and providesGovernmentwide leadership for human resources management. First,OPM regulates employment under title 5, United States Code—the lawunder which most Federal civilian employees are hired, paid, andmanaged. For example, when agencies fill jobs through competitiveexamination, they must comply with OPM-issued rules andinstructions.22 OPM’s authority also covers internal placement (e.g.,merit promotions and reassignments) and excepted serviceemployment.23 Moreover, OPM’s influence extends beyond itsregulatory bounds: even when agencies are not required to followOPM rules or use OPM systems, they may adopt them or developcomparable rules or guidelines.Second, OPM develops qualification standards—minimumrequirements that an applicant or employee must meet to be placed in aposition. These standards determine which applicants agencies mayconsider for jobs (or, more accurately, which applicants they may notconsider); they also dictate, at least in part, how agencies will assessapplicants.24Finally, OPM manages Governmentwide human resources initiativesand establishes expectations for Federal human capital management.For example, OPM is leading two hiring-related electronic government(“e-gov”) initiatives: Recruitment One-Stop, an effort to standardizeand simplify the job search and application process; and e-Clearance, aneffort to improve the security clearance process.25 OPM can alsoencourage change in less formal ways. For example, in 2002 OPM andthe Partnership for Public Service issued a “Pledge to Applicants” thatcommits OPM and Federal agencies to an open, comprehensible, andtimely hiring process.Job ApplicantsObviously, the depth and quality of the talent pool depends on jobseekers. Individual job seekers decide whether to consider Federalemployment and whether to become applicants for Federal jobs.However, applicants’ influence on hiring decisions is not limited to thedecision to apply. Applicants also provide most of the information thatagencies use to assess and select new employees.

Research QuestionsIn conducting this study, we attempted to answer four questions:1. How is the Federal Government using automated hiringsystems, particularly to assess employees? This question includesmatters such as: why agencies are seeking to automate the applicationand assessment process; how automated hiring systems operate; andhow agencies have modified their application and assessment processesto accommodate or take advantage of automation.2. What are the effects of automation? This question includesmatters such as: how automation affects (1) the quality of assessment,referrals, and new employees; (2) time to hire; and (3) the fairness andopenness of the hiring process. The standards we used to evaluate theeffects of automation, and on which we base our findings andrecommendations, are discussed in the next section of this report.3. What role should automated hiring systems have in theassessment and selection of Federal employees? As statedpreviously, we did not aim to provide a “buyer’s guide” to automatedhiring systems but, rather, to determine what these systems cancontribute to Federal hiring, particularly the assessment process andthe resulting selection decisions. Restated, we wanted to knowwhether existing systems and technology can meet the requirements ofFederal agencies and the Federal hiring process, and if so, what hiringfunctions they can usefully perform or support.4. What should OPM and Federal agencies do to use automationeffectively in hiring? Through this question, we explored approaches,policies, and practices that are essential or helpful to effective use ofautomated hiring systems. This question also covers broader issues,including assessment strategy, the roles of OPM and agencyleadership, and change management.Our answers to the first and second questions appear in the sectiontitled “Automation Objectives and Initiatives”; our answers to the thirdand fourth questions appear in the sections titled “Results and AgencyExperience” and

automated hiring systems can be used in the hiring process, particularly to help identify and select the best person for the job. Below, we provide an overview of our major findings. The Technology Automated hiring systems have a place in Federal hiring—but only if used wisely. Automated hiring systems can be used to identify a pool of

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