Discretion in Hiring

Abstract:

This study was the first to empirically assess the value of discretion in hiring.

To do it, the researchers designed and deployed a job test across 15 companies hiring low-skill service workers. Each job candidate was tested and given a score corresponding with their potential: green, yellow, or red.

Managers were given access to the test scores and encouraged to use them, but were allowed to overrule the test score whenever they felt it was appropriate. Job outcomes were measured by job tenure (a key measure of quality in the service industry), and the researchers controlled for productivity.

The results were consistently worse job outcomes where managers exercised more discretion.

Key Points:

• Using the job test increased the tenure of hired workers by an average of 15%.
• Managers who overruled test recommendations consistently hired workers with shorter job tenure.
• Their poor results suggest that managers generally exercise discretion because they are biased or have poor judgment, not because they are better informed.

Takeaway: 

Companies that favor empirical measures of potential such as job tests over managerial discretion make consistently better hiring decisions.