Outsourcing the HR Department

I thought this was an interesting hypothesis, that the inability of coporations to use aptitude tests on potential hires (something that has been effectively killed by civil rights suits) has led to the increased reliance on college credentials as a screening mechanism.

I think there is an element of truth to this, but I suspect this would have happened anyway as the presure to cut costs caused companies to push their candidate evaluation and screening onto other institutions.  As I wrote a while back

There is some rationality in this approach [to hiring mainly from the Ivies] – it is not all mindless snobbism.   Take Princeton.  It screens something like 25,000 already exceptional applicants down to just 1500, and then further carefully monitors their performance through intensive contact over a four year period.  This is WAY more work and resources than a private firm could ever apply to the hiring process.  In effect, by limiting their hiring to just a few top schools, they are outsourcing a lot of their performance evaluation work to those schools.

I don't know if these percentages are entirely correct - I would argue the education / skills component of my mechanical engineering degree was higher than 10%, but that may be just my personal bias - but the basic approach seems sound

Peter Thiel describes higher education as a "giant selection mechanism" and estimates that only 10% of the value of a college degree comes from actual learning, and 50% of the value comes from selection (getting into a selective university) and 40% comes from signalling (graduating from a selective college becomes known to employers).  If employers could use intelligence tests instead of college degrees as measures of aptitude, it might be a lot more efficient and more cost-effective than the current practice of using very expensive four-year college degrees that add very little in terms of educational value (at least according to Thiel).


  1. NL_:

    College diploma also acts as a proxy for references. The candidate was able to complete a full education (generally four years) and that shows some basic level of commitment and competence (if not intelligence or creativity). In the absence of a lengthy resume or extensive references, a college diploma is a little seal of approval that somebody has met some basic level of acceptability.

    It's not a perfect proxy, but as the pool of applicants grows larger (bad economy) and the proportion with college degrees grows, it's an easy task to immediately weed out the uncredentialed. Sure, maybe by wiping out the dropouts you missed that one perfect hire, but since it's hard to evaluate new hires before seeing them work firsthand, a rough proxy is better than nothing.

    College education is only moderately valuable. But as long as you have plenty of plausible applicants with degrees, there's little harm to relying on college to winnow the field.

  2. gn:

    We used a "programmers' test" for many years to screen applicants for our IT group. We tracked scores on the test versus quality of people over many years and found strong correlations.

    I was informed by legal recently that I could no longer give a piece of paper to the candidates and ask them to take the test as part of the interview process - but I am still allowed to read the questions to them face-to-face and write their answers down myself. For the complex ones I can write things on my whiteboard and have them answer from that. Stupid, embarrassing, and typical..

    Or I can just ask what school they went to, I suppose.

  3. Big John:

    "Using intelligence tests instead of college degrees as an apptitude test"...
    Sounds like a great business opportunity here for an independent private company to offer intelligence testing to individuals and then charge potential employers seeking the results. Yes, it would end up being a self-selected sample, but it would offer another really good independent indicator for a potential employer.
    It is very scalable, has little capital costs, and is much needed. Anybody want to join me in a start up??

  4. phil e buster:

    My mom always said I should study more like Peter Theil, but I didn't listen.

  5. Duane Gran:

    What legal challenge has been raised on this front? At my business we routinely ask candidates to take a written test and it has proven to be useful. Is this a risky hiring behavior?

  6. dearieme:

    A friend used to hire administrative staff for a veterinary college, back before word processors existed. He found that a useful screen was to bin any application that misspelled "veterinary".

  7. Alyson:

    This is an interesting twist on outsourcing. It is unfortunate that aptitude and skills tests are no longer allowed, I feel that they would be more effective. There probably is a lot of truth to the high level of exceptional graduates that come out of our country's top universities. But what about the students that don't have much of a work effort, they were fortunate enough that there parents were able to buy them in? There are a lot of exceptions to these theories. I'm sure that a lot of intelligent people come out of Harvard and Yale but that doesn't mean that everyone coming out of a state university is an idiot. Each person needs to be looked at for their own unique abilities and skills, not just what college they attended.

  8. daniel:

    GRIGGS v. DUKE POWER COMPANY, 401 U.S. 424 (1971)
    African- American employees claimed employer Duke Power Company's internal transfer policy, which required most employees to register a minimum score on two separate aptitude tests in addition to having a high school education, violated Title VII of the 1964 Civil Rights Act?

    Supreme Court held it did: Duke's standardized testing requirement prevented a disproportionate number of African-American employees from being hired by, and advancing to higher-paying departments within, the company. Neither the high school graduation requirement nor the two aptitude tests was directed or intended to measure an employee's ability to learn or perform a particular job or category of jobs within the company. The Court concluded that the subtle, illegal purpose of these requirements was to safeguard Duke's long-standing policy of giving job preferences to its white employees.

  9. Will:

    That's pretty depressing if the stuff you learn at a University only comes out to 10% of the value of the degree. Doing well in school doesn't necessarily mean you'll do great in a work environment. At least so far as my profession is considered (IT), in school your provided with specs and have to produce working code. The only catch is generally getting the specs (IE understanding what people want) is the hard part, the coding is the easy part. I'm not aware of any University program that can really train you for soft skills and understanding what people want. Strong technical skills are also needed, but it's not necessarily as large a factor as you would think.

    I would personally take someone from a state school who did 3 internships during school over someone from an Ivy league school who has never been in the workplace. I'm of course bias though, coming from a state school and having done a co-op program.

  10. Ted Rado:

    When I graduated from university many years ago, I had the strong idea that someone from a more prestigeous school and/or had a PhD was automatically a better engineer. Over the years, I came to the following conclusions:
    1) It doesn't matter what school an engineer
    attended after 20 years beyond graduation.
    2) After a number of years in industry, those who
    continue to study and advance their skills
    prosper. Those who rest on their oars fall
    2) A PhD who does not continue to add to his
    skills falls behind a BS that does.
    3) Personal traits, such as diligence, thoroughness,
    innovativeness, and hard work soon eclipse the
    affect of school or degree level.

    I have seen engineers at all degree levels and many schools quickly become effective or ineffective. It all depends on how interested they are in their profession and how hard they work. I have seen PhD's from the best engineering schools fall into a habit of cut-and-try
    lazy work. I have seen similar people succeed brilliantly. It all depends on the individual.

    The ideal case would be a smart person getting an advanced degree from a top school, then applying himself enthusiastically on the job. Unfortunately, this does not happen very often.

    Bottom line: Find engineers who are hard working, love their profession, and throw themselves into their assignments.

    Interestingly, AIChE data suggest that after a number of years, salaries of those with different degree levels and schools tend to come together. Individual effort wins out in the end.

    To say hat a PhD from MIT will, after 20 years, automatically be a more effective engineer than a BS from a state university is nonsense. Human characteristics seem to trump other factors.

  11. txjim:

    Once everyone has a degree it no longer serves as a reliable signaling device. I recently read a college degree is the new high school diploma. Based on the recent grads I've dealt with, this sounds about right.

  12. Craig:

    Along with aptitude tests, you can't get good references anymore either, because applicants will sue former employers who talk bad (i.e. honestly) about them.

  13. Ian Random:

    What's interesting is that the GRIGGS v. DUKE POWER COMPANY is really about the quality of the free public education they received when you think about.

  14. Duane Gran:

    I did a little more reading about the legal implications and it seems that you are at risk if the test is tangential to the skills required for the job. The take away I got was to make sure the test has a job specific purpose.

  15. david foster:

    The original Griggs v Duke Power decision ALSO ruled that high school graduation cannot be required for a job unless it is clearly relevant. The extension to college degrees is obvious.

    I've never seen a coherent explanation of how so many companies have concluded, in the wake of Griggs and follow-on court decisions and legislation, that tests are forbidden but degree requirements are safe.

  16. caseyboy:

    A 4-year degree is a very inefficient employment screening alternative. But what do you expect from a society where they don't keep score at little league games, where everyone gets a trophy and where teachers will accept 2+2=5, because little Johnie says it is and we mustn't cause him to feel inadequate.

  17. txjim:

    Old F500 company I used to work for - a full time position opened up. One of the applicants was a contractor who had this exact job for 2 years before he left to join another company. I recruited him to apply since he had been outstanding performer. He failed one of the stupid HR tests. He was DQ'd.

  18. IGotBupkis, Official Chaneller of the OWS Zeitgist:

    >>> 2) After a number of years in industry, those who
    continue to study and advance their skills
    prosper. Those who rest on their oars fall
    3) Personal traits, such as diligence, thoroughness,
    innovativeness, and hard work soon eclipse the
    affect of school or degree level.

    In my experience, little attention is paid to experience at all in the wake of a degree. I have more than 30 years of experience in the computer field, with a wide array of job tasks. While my programming skills appear dated on paper, I have performed recently and excellently as both a software tester and SQL programmer. The lack of callbacks when applying for jobs focusing on those two specific recently demonstrated skill areas is downright deafening.

    My own experience is that the software field is so constantly changing that any effort to "update" your skills without a clear job objective is a waste of time, as, if any job you get does not specifically utilize those skills, then, 2,2,5 years down the road when you're looking again for employment, that knowledge will already have become utterly obsolete. The real thing HR people need to be looking for is a non-ossified career path, in which one is regularly learning new things just to do the job. When that is the case, you can quickly ramp up your abilities to intermediate level within a couple months of employment (during the same time as you're learning all the other job requirements needed to get up to speed) and your years of experience will give you far more understanding of what to do and expect in any random situation that you will be far better off than someone with a recent degree and marginal experience. I can state without equivocation that I picked up usage of a software regression testing tool within six weeks and was VASTLY more capable with it than a couple of "noob" grads with over a year of experience working with it each. I knew what it SHOULD be capable of doing, so, when I saw a poorly documented function call that did something critical to using the tool effectively, I knew instantly what it was for. When I asked them about the call, they had no idea what it did or what it was for.


    P.S., If you want a quick test for software people, an understanding of maps and such is an excellent proxy. If they are familiar with the area, ask them to "drive" from point "a" to point "b" in the locale in their heads, and describe to you anything of note along the route -- landmarks, stores, traffic signals, etc. I can tell you the number of traffic lights from any given point "a" to point "b" anywhere within about 15 miles of my home area, as well as detail most of the stores, restaurants, and such. This relates to your capacity to form and manipulate 3d maps in your head, which is a critical key to good programming ability.

  19. IGotBupkis, Official Chaneller of the OWS Zeitgist:

    let's get rid of the bolding


  20. IGotBupkis, Official Chaneller of the OWS Zeitgist:

    >>> 2,2,5 years

    "2,*3*, 5 years"

  21. Ted Rado:


    I didn't realize that the computer field had that much of an obsolescence problem. Are not the basic ubderpinnings constant? In my field (chemical engineering), the basic concepts do not change. However, the means of implementation change continually. Thermodynamics, kinetics, heat treansfer, fluid mechanics, stoichiometry, etc. will be basic to the profession forever.

    Having said that, it is up to the individual to keep updated. As an example, I was one of the very few in my age group (I am now 83) to learn Fortran back in the 70's and become facile in modelling chemical processes and plants. Fortran skills also enabled me to attack complex problems that would have been impossible to do otherwise. Many things change, such as electronic vs. pneumatic control instruments. New processes are invented, as well as new types of chemical process equipment. New work is published by researchers.
    To stay competitive, one must read the journals, and study those things (Fortan for example) which one needs to learn to keep up with the profession. Many engineers seem to lack the interest to do so.

    Over the years, I have studied ground water hydrology (re uranium solution mining project), soil mechanics (as a project mgr), etc. I wish I had had the time to do more. Many do nothing and their skills stagnate. For them I have lttle sympathy. Unfortunately, many believe that once you get your diploma, you have it made for life.

    I am sure every field has the same challenges. Scientific and technical progress is accelerating, so the problem is greater than ever. There is no way to keep up without a) thoroughly understanding the basics, and b) keeping up with new developments. This is why one's college or degree level fades into the background over the years, and iindivudual effort and dedication to one's profession become more important.

    I have a young friend (BS in chemistry) whom I have encouraged to study, study, study, on every assignment. He has become expert in gene splicing and has acquired a reputation in the field (he has published papers on the subject). He earns an excellent salary. He is not an Einstein and did not go to a prestigious university. Hard work and dedication is the key. (You obviously can't be a moron. If you were, you would be in the US government instead).

    Can you imagine having a useless snap course degree and then not even keeping up in that field? McD, here I come! Then off to the park to protest my unfair situation. What rubish!

  22. Dan:

    Good post, Ted, and I wholeheartedly agree (though I'm not in your industry. I think your thesis holds true for many professions).

  23. Dan:


    Do you have kids? I wonder, because I do, and teachers don't accept wrong answers on math homework to keep kids from feeling "inadequate," as you say. They don't accept wrong answers at all, and there are plenty of red marks on my kids' homework (though luckily they're mostly doing well).

  24. Ted Rado:


    Thanks for your kind remarks.

    Thanks to the USG, among others, we have a sense of entitlement. We should have a house we cannot afford. We are entitled to a college degree. We are entitled to the same standard of living as the guy who studied harder and works harder.
    One is only entitled to that which he earns. Anything one gets bayond that is due to government assisted stealing from those who work harder and achieve more.

    What is hilarious is that when the poopoo hits the fan, we blame and demonize someone else for causing the problem: Wall Street, the insurance companies, the realtors, bankers, etc. If all else fails, blame George Bush. If THAT fails, blame it on George Washington. If he hadn't won, all this would be Queen Elizebeth's problem.

  25. John Moore:

    If you want a quick test for software people, an understanding of maps and such is an excellent proxy. If they are familiar with the area, ask them to “drive” from point “a” to point “b” in the locale in their heads, and describe to you anything of note along the route — landmarks, stores, traffic signals, etc. I can tell you the number of traffic lights from any given point “a” to point “b” anywhere within about 15 miles of my home area, as well as detail most of the stores, restaurants, and such. This relates to your capacity to form and manipulate 3d maps in your head, which is a critical key to good programming ability.

    As a hardware and software engineer, programmer, and software architect with decades of experience, I would fail this task badly. Sorry, but it just isn't relevant, which I suppose illustrates the problem with giving non-job-specific tests. I've hired plenty of software types and found *no* useful metric other than recommendations from people I know and trust.

    As to the issue of obsolescence related to other engineering fields, I agree. For most software work, the basic education required is actually not much - I could teach any *smart* high school kid most of the basics. However, these days most programmers are not using much of that knowledge. Instead they are more like assembly line workers whose tools and procedures change very rapidly. Hence a lot of the hiring is done by matching acronyms on a resume to acronyms in the job requirements.

    A lot of this is because software engineering / programming failed to make the distinction common in most engineering fields between technicians and engineers. Abilities, skills and knowledge probably very far more wildly in the "programming" profession than any other, because the activity of "programming" ranges from extremely sophisticated to dully routine, and HR departments haven't figured that out.

    The requirement for a degree is thus really arbitrary in software engineering. A good "civil rights" lawyer might be able to vanish that one as being far less relevant to getting the job done than a job related test.

  26. txjim:

    Great thread!

    Since IT and new hire testing have been discussed, I'll share with you my favorite test I used to give to GUI programmers back in the go-go days of dot com mania.

    Instructions: Review the requirements and estimate the time it will take you to code the requirement. Once the estimate is complete, proceed with coding the requirement. You may use any language available on the PC provided.
    Requirement: Create a form with two text boxes. Anything typed in the first text box must appear in the other text box, in reverse order.

    Silly I know but it was surprising how many supposedly "senior programmers" struggled. If anyone jumped in without asking questions, we knew that dude was either awesome or going down in flames. Most people choked on the estimate! We had to stop using it when the CEO's nephew flamed out in spectacular fashion.

    Igotbupkis: I hear ya re: SQL work. HR depts filter out many highly qualified DBA and developer candidates based on bad info. We rely heavily on peer networking to bring in good people and hope they survive the HR gauntlet (see my earlier post).

    Ted: IGB is right re: IT obsolescence. The core IT technology is pretty much the same as it was 10 years ago but these days the average IT dept is focused on outsourcing. The bean counters really don't give a damn if you are awesome when they can hire 5 (or more) offshore guys for the same price. The end result may be less efficient and more expensive but the bean counters hope to make it up on volume.

    IT obsolescence these days is driven by a shift of skills in demand. Now Big IT is desperate for people who are technical managers who can run and offshore team and basically be the secret ingredient that makes the offshore model work. Talk about a tough job!

  27. txjim:

    John M said:
    ...they are more like assembly line workers whose tools and procedures change very rapidly. Hence a lot of the hiring is done by matching acronyms on a resume to acronyms in the job requirements.

    Right on amigo! That is the screening process in a nutshell.