Nobel Laureate Says There's A Better Way To Make Hiring Decisions

Business Insider

Most hiring decisions come down to a gut decision.

According to Nobel laureate Daniel Kahneman, however, this process is extremely flawed and there's a much better way.

Kahneman learned in his days as a psychological evaluator for the Israeli Army how hard it is to judge people by intuition. The army's interview procedure was "almost useless for predicting the future success of recruits," he writes in his book Thinking, Fast And Slow.

So the young officer designed a better evaluation system, working from the insights of psychologist Paul Meehl, who argued that simple statistical rules are superior to intuitive judgments.

What he came up with was so controversial it almost caused a mutiny. Kahneman asked interviewers to put aside personal judgments and limit interviews to a series of factual questions meant to generate a score on six separate personality traits.

A few months later, it became clear that Kahneman's systematic approach was a vast improvement over gut decisions. It was so effective that the army would use his exact method for decades to come.

Why you should care is because this superior method can be copied by any organization — and really, by anyone facing a hard decision.

Kahneman says as much in Thinking, Fast And Slow:

Suppose that you need to hire a sales representative for your firm. If you are serious about hiring the best possible person for the job, this is what you should do. First, select a few traits that are prerequisites for success in this position (technical proficiency, engaging personality, reliability, and so on. Don't overdo it — six dimensions is a good number. The traits you choose should be as independent as possible from each other, and you should feel that you can assess them reliably by asking a few factual questions. Next, make a list of those questions for each trait and think about how you will score it, say on a 1-5 scale. You should have an idea of what you will call "very weak" or "very strong."

These preparations should take you half an hour or so, a small investment that can make a significant difference in the quality of the people you hire. To avoid halo effects, you must collect the information on one trait at a time, scoring each before you move on to the next one. Do not skip around. To evaluate each candidate add up the six scores ... Firmly resolve that you will hire the candidate whose final score is the highest, even if there is another one whom you like better — try to resist your wish to invent broken legs to change the ranking. A vast amount of research offers a promise: you are much more likely to find the best candidate if you use this procedure than if you do what people normally do in such situations, which is to go into the interview unprepared and to make choices by an overall intuitive judgment such as "I looked into his eyes and liked what I saw."

Kahneman's book also discusses the cognitive failings of   financial advisorsamateur investorspundits , and  pretty much everyone

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