Selection Ratios: Taking Advantage of the Talent Buyers’ Market

When it comes to hiring, a lot has changed over the past few years. Economic conditions have led to major changes in the structure of the talent marketplace, and the development of Internet technology has provided us with the ability to collect, manage, and analyze information in ways that once seemed impossible. These two trends are not independent of one another, and developing effective hiring strategies requires a good understanding of their inter-relationship. We I/O Psychologists often make use of a statistic known as the “Selection Ratio” to help guide us when we are developing employee selection strategies and assisting organizations in making important choices related to their hiring process. The concept of the selection ratio does an excellent job of summarizing the relationship between the current talent market and the influence of technology on today?s hiring process. Here I’d like to explain what selection ratios are and provide some information about how online screening can help businesses take advantage of the favorable selection ratios that have been created by the availability of technology and the state of the current talent market. Selection Ratios Defined The selection ratio is a very easy concept to understand. It is simply the number of people hired divided by the number of applicants. Selection Ratio = Number of Hires / Number of Applicants Because it is a ratio, the selection ratio’s value must range between 0 and 1 (theoretically it really ranges from -1 to 1, but in the real world you will never find a negative selection ratio in a hiring situation), with 0 indicating a low selection ratio and 1 indicating a very high selection ratio. A selection ratio is low if any of three conditions exist:

The denominator (the number on the bottom) is large

The numerator (the number on the top) is small
The denominator is large at the same time the numerator is small

As the numerator and the denominator grow farther apart, the selection ratio gets smaller. When they grow closer to one another, the selection ratio will get larger. What Does This Mean To Me? When it comes to selection ratios, the lower the ratio, the better ó because the smaller the ratio is, the greater the likelihood you will make good selection decisions. Think about it, if you hire every person who walks in the door, no questions asked, then you will have a selection ratio of 1. It does not take a staffing genius to know that hiring everyone who walks in the door without investigating their qualifications will have disastrous consequences. However, if you hire only a few people (low numerator) but have a high number of applicants (high denominator), you are in the proverbial cat bird seat, because you can afford to be very picky. In fact one of the most common ways that we I/O Psychologists use selection ratios is to tell organizations how picky they can afford to be based on the number of applicants for a job and the effectiveness of the selection tools that are being used. When it comes to selection ratios an ideal situation is that you have a great many applicants for a position (big denominator) and only need to hire a few of them (small numerator). This is exactly the situation that has been created by the current talent market. A few years ago the advantage was clearly for the job seeker, as there were plenty of available positions to go around. These days things have changed. In today’s world the number of available positions has shrunk considerably. This means that numerators of selection ratios have gotten much smaller across the board. At the same time, because there are more job seekers than available positions and because it is so easy to search for and apply to jobs using the Internet, organizations are being flooded with applications. This means that the denominators of selection ratios have gotten much bigger across the board. These conditions have created a situation in which most organizations are experiencing selection ratios that are very small. It should be an extremely favorable position for organizations. Unfortunately, many organizations are losing out because they are not currently equipped to take advantage of these favorable selection ratios. Are You Missing the Boat? Taking advantage of good selection ratios requires the use of the right set of tools. Organizations that are not using these tools are squandering their chance to catch the best fish in the talent pool. Using the right tools is essential for two reasons:

The flood of applications submitted by job seekers is actually causing problems for organizations that are not properly equipped to deal with increased levels of job seeker activity. Without the right tools to help deal with high applicant volume, the advantage gained by having a huge number of possible applicants will be surrendered.
A low selection ratio means organizations can by picky and can afford to raise minimum requirements, choosing only the best applicants.

In a situation where you have a low selection ratio, the laws of probability are on your side. These laws dictate that the more applicants you have, the greater your chances of choosing a good one. But in reality, relying purely on chance is a terrible idea. Taking proper advantage of a good selection ratio requires organizations to be choosy. The choosier you are (assuming that informed choices are made) the more you will be able to make a favorable selection ratio work for you. Being choosy requires the use of job-related selection tools that will provide you with the predictive efficiency needed to clearly identify the best available talent. When it comes to making good selection choices, each increase in your ability to predict which applicants are most suited for the job will lead directly to an increase in the overall ROI of your selection system. Fortunately, technology and science have provided a set of tools that, when used properly, can really help organizations make sure they are capitalizing on today’s talent buyers market by helping them process large numbers of applicants while simultaneously making sound decisions about which applicants to hire. The Solution: Online Screening Advances in Internet technology have led to the development of two distinct types of web-based screening that can be used together to provide a two-pronged approach for taking advantage of favorable selection ratios. The first type, non-scientific screening, provides the ability to automatically “screen out” unqualified applicants while the second type, scientific screening, provides a more in-depth investigation of the talents and traits of remaining applicants in order to “screen in” applicants most suited for the duties required by a particular job. Because each of these types of screening works in a different way, using them together can provide an extremely effective way for organizations to deal with applicant overload while simultaneously being picky enough to take advantage of a favorable talent market. Non-Scientific screening: “Screening Out” When job seekers respond to a company?s recruiting message and decide to apply for a particular job they must be evaluated. This means that situations where the number of people applying for a particular job is very high can place a significant drain on a company’s hiring resources. Non-scientific screening tools offer an excellent way to help companies to avoid this resource drain because they have been designed specifically for dealing with applicant volume by quickly and inexpensively screening out unqualified applicants at the earliest stage in the hiring process. A major advantage of web-based non-scientific screening tools is that they automate this screening out process. Once the screening system is configured, it runs by itself, automatically screening out applicants who do not meet basic job qualifications. In fact, most non-scientific screening systems can be anchored directly to a job posting, providing a quick and transparent way to weed out unqualified applicants. The result of this process is that recruiters do not have to waste time evaluating applicants who are not qualified for the job. Non-scientific screening alone will not help you take full advantage of favorable selection ratios. While it can help you to process the applicant volume that has resulted from current economic conditions, it doesn’t really tell us much about an applicant’s ability to do a job. So while filtering out applicants who don’t have eight years of experience or aren’t willing to relocate does add some value to the application process, it really doesn’t stray too far from the stuff that you can find on a resume. Remember, in today’s market we can afford to be very picky so why not take the time to use tools that can help provide a more in-depth investigation of each applicant in order to better predict how well they can perform a given job? Maximizing your decision-making process is best accomplished by using an entirely different type of process known as scientific screening. Scientific Screening: “Screening In” Taking advantage of favorable selection ratios involves learning things about what makes an applicant tick and then using this information to make informed predictions about their suitability for a given job. This is the role of online scientific screening (also known as online assessment). Scientific screening measures “below ground” information (that is, information that is not readily apparent from a resume or job application) about a candidate and compares this information to job requirements in order to predict which applicants will be most successful. These predictions are used to screen in applicants who have the traits necessary to perform the job effectively. Scientific screening tools have an advantage over simpler, non-scientific screening tools because they use a strict process to ensure that all screening questions are directly related to critical aspects of job performance. This relationship provides the ability to make informed predictions about which applicants are most suited for a given job and ensures that only the most qualified candidates continue on in the hiring process. Some of the most common web-based scientific screening tools measure traits such as personality, situational judgment, cognitive ability, personal motivators, integrity, and life/work experiences. Automating the screening in function at this point in the process adds additional efficiency because it provides an easy way to collect and analyze the data needed to make decisions regarding applicants’ qualifications. In most cases the results of this process can be integrated directly into those provided by non-scientific screening to create a fully automated screening system that requires very few resources to deliver the most qualified applicants directly to the recruiter or hiring manager’s desktop. Conclusion When it comes to your ability to make good hiring decisions, the selection ratio tells all. A large number of applicants competing for a small number of spaces provides a real opportunity for organizations to grab top talent. But if you don?t have the right tools to properly process and evaluate the increased volume of information that has resulted from the interaction between technology and today’s labor market, you will be left standing on the sidelines while your competition makes the big play. Getting into the game and taking advantage of favorable selection ratios requires the use of both scientific and non-scientific screening tools.