Wharton professor Peter Cappelli argues in a new book that companies need to recruit talented people, and train them–the way they used to.
When describing the skills shortages plaguing their companies, CEOs sound like the Ancient Mariner: Water, water everywhere, nor any drop to drink! Even with the unemployment rate at 8.2%, business leaders complain there aren't enough people qualified to fill "today's jobs," shorthand for positionsthat require expertise in specific technologies or pretty much anything in health care. Usually, America's schools are the fall guys. Primary education, we are told, does a lousy job imparting the fundamentals of math and science. Colleges graduate too many liberal arts majors, when they graduate people at all.
Peter Cappelli is having none of it. In Why Good People Can't Get Jobs: The Skills Gap and What Companies Can Do About It, which was released today by Wharton Digital Press, the University of Pennsylvania management professor argues that employers are largely to blame for their hiring troubles. Their sins include larding job descriptions with an impossible number of requirements, including many that only people who have already done that exact job can meet. They also rely too much on software to screen thousands of applications, which dooms promising candidates whose resumes lack the precise words that alert such programs.
Cappelli thinks companies should switch from "buy" to "build" orientations: instead of shopping for perfect-out-of-the-box outsiders, they should expand training programs and offer apprenticeships. Inc. editor-at-large Leigh Buchanan spoke with Cappelli about getting the right people into the right seats.
First off, I want to commiserate with your son, who studied classics and had trouble finding a job after college. My son graduated two weeks ago. History major. We are not optimistic.
Sometimes the temp world is out there for these guys, even though I haven't quite encouraged my son to do that yet. He's had a couple of jobs but they were like warehouse employee. Then he went back to school and got a phlebotomy certification to work in health care. Since then he's been looking for health-care jobs but couldn't get those either. I was in China in February and they have the same problem: that college graduates aren't doing very well, particularly when compared to factory workers. The Chinese really did take education seriously. They are very shaken up by this.
While working on the book, did you talk to any job seekers who felt the school system had failed them?
No. And when you follow up on the surveys of hiring managers asking about their concerns, they pretty much never talk about deficiencies in academic skills. When they rank the issues they say are important, academic skills are way, way down near the bottom. What they do complain about is work experience. They want someone who has done this exact job before and doesn't need training. The question is: is that a legitimate complaint? Because kids like yours and mine haven't had three years doing phlebotomy or sales or coding. It doesn't indicate there's something wrong with the applicants. It indicates something has changed on the employers' side. What they are expecting now is completely unrealistic.
Why have employers' expectations become so inflated? Is it because the pool of job seekers has grown enormous?
Part of it is that they can afford to get picky in a downturn. Part is that they believe they should be able to find these perfect people. It's irrational. They are leaving vacancies unfilled for months and months while they hunt for somebody who could come in tomorrow and do the job. They are passing by people who would take a few days of training to get up to speed. They don't know what it costs to keep these positions vacant or how little it would cost to give people a few days of ramp-up.
The other, longer-term trend is that companies have stopped developing people internally. They've stopped hiring kids out of college and grooming them for management ranks. That means they no longer have their own training and development departments. Once you get rid of the systems for developing people, you no longer have a choice–you have to recruit outsiders. So now everyone is chasing the same people, who are doing exactly the same job that these companies have vacant. Of course it's hard to find enough of those people to go around. But that doesn't mean there's anything wrong with the labor market.
I find astonishing the statistic that only 21% of US employees have received any kind of employer-provided training in five years. All I ever hear business leaders say is "hire for attitude, train for skills." Are they lying?
There's this enormous disconnect between what employers think is going on in their organizations and what is actually going on. There's also often a disconnect between what the top human-resource person thinks is going on and what goes on down the line. Companies have so gutted their human-resource departments, and everything is now automated. So a lot of people don't have a feel for what's going on. These surveys asking hiring managers about job candidates are completely at odds with what you hear from CEOs. Who is right? I would say the hiring managers.
Increasingly I hear companies let departing employees compose the job descriptions used to hire their replacements. Is that helpful?
When you ask an individual what is required to do your job, they tend to inflate it because it makes their work look more important, which helps their resume. It's never a good idea to ask self-interested people to provide reliable information. The better thing would be to have some expert in human resources cook these job descriptions up. That's how it used to work. They're reality testers. They ask: Do you really need a Ph.D. to do this job?
Is it still a best practice to develop pipelines of talented people who can be popped into vacancies as they occur? CEOs like Kevin Ryan over at Gilt Groupe are fantastic at that.
In the '70s, every company used to do this. The single biggest block of time on the CEO's calendar was talent reviews where they assessed their people and tried to figure out what they needed next. Now people aren't even aware that their companies used to have all these development programs and job-rotation programs and things like that. Because they were hired from the outside, so they have no institutional memories.
I agree that using software to evaluate employment applications is like trying to do calligraphy while wearing Mickey Mouse gloves. But if you are deluged with thousands of applications, what alternative do you have?
That's part of the conundrum. At least initially, companies were using software to make it easier for people to apply for jobs. They seemed to think that if you just got lots of applicants, it boosts their quality. So there's no way you could process all these things by hand. They have to automate some of it. The question is whether they have to take all the human judgment out of it. As we've discussed, there's a problem with the way jobs are described and what the requirements are. Hiring managers say whatever they want and it gets coded into the software. There are lots of points where you could use software to do some of the screening for you. But in an effort to get their costs down, companies have taken all the humans out of the process, and with it all the human judgment. It ends up being pound-foolish.
Is there any data that compares the hiring success of large companies with that of smaller and start-up companies? Smaller businesses, I presume, are much less likely to relegate applicant evaluation to software systems. Many don't even have HR departments.
My guess is smaller companies are better at [hiring] for the reasons you are describing. If you look at it on paper the smaller companies would probably complain that their costs per hire are greater than those of big companies. But it's because of the quirkiness of internal accounting where all we can see are the current costs. We can't see long-term costs or the benefits of better hires. Also, people have to be broad in those kinds of companies. You can't have these long lists of micro-requirements. Smaller companies probably are paying more attention to attitude than to credentials and experience.
In the book, you mention Rich Sheridan, CEO of Menlo Innovations. Last year I sat in on a hiring session at his company. Twice a year, Menlo brings together all 30 or so job applicants for an evening and pairs them off to work on different projects and exercises. They switch pairs three times, and the stated objective is to make your partner look good enough to get hired. In a country that lives and dies by innovation, could we better compete if more companies were like Menlo and got innovative about how they hire?
You have to be innovative because clever applicants know how to game the system. One of the most effective ways to hire is with behavioral interviewing. Tell me about a time when you did blah blah. But applicants know how to answer those questions. So you've got to innovate to stay ahead of them. Some companies are very good at that. There are famous stories about Disney, which sort of misdirects applicants during group exercises, where you think you are supposed to demonstrate how smart you are but they are actually looking for something different. A generation ago companies used to be very smart about this stuff. They would spend days interviewing people. They used psychologists.
Since employers seemed determined to outsource training, should we be developing new kinds of vocational schools? Or at least opening more vocational schools?
Vocational education is a mess. It seems way under-funded. To the extent to which employers have a legitimate complaint around skill issues, it does relate to vocational education programs. But the schools have a legitimate complaint as well, in that the employers have to help them stay up-to-date. If you think about this as a supply-chain problem, it would be crazy for a company to say, we're getting a key component from suppliers but we're not going to talk to them. We're just expecting they are going to produce exactly what we want. That's the way most employers deal with schools.
How will we wean companies off cheap or unpaid internships and get them to adapt more substantive apprenticeship programs?
I don't think we can rely on enough employers to act because they are civic-minded. In the '90s, companies participated in these kinds of programs because they thought it was right for the community. And after a while they realized it was working for them as well. We have to help businesses understand that it's cheaper to develop people from within. Appeal to their self-interest. That usually works.
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