Lower Strategy Execution Risk by Reducing Human Capital Risk

Lower Strategy Execution Risk by Reducing Human Capital Risk

Turning the Tide against rising Human Capital Risk

My post from this past Wednesday pointed to (1) the ongoing retreat from performance ratings, (2) the current backing away from background checks, and (3) ongoing challenges to traditional screening and selection practices as all leading to troubling and rising levels of Human Capital Risk. That post promised that this post would offer practical answers to reducing human capital risk.

Reducing Hiring Risk

Hiring risk takes on two forms- screening decision mistakes and final decision (i.e. interview) mistakes.

The Screening Solution involves making valid online screening tools shorter, more visual, more job related and/or more fun. At PeopleAssessments.com, we have created a Personal WorkSTYLE profile that identifies which of nine predictive types people fall into after just six clicks on behaviorally anchored scales. Old school test publishers writhe in anguish, but if predicting performance forms the goal, a recent study conducted at a modern bank in the Middle East found the WorkSTYLE tool, combined with an equally short measure of Competitive Strategic Priority, earned a 37 validity where a 350+ click traditional assessment delivered 35 for the same set of about 80 senior managers (below the C level).

If the screening process can’t be shortened, it can be made more engaging or fun. Images and avatars bring the candidate into challenging situations faced on the job. Situational Judgment tests and Performance Scenario simulations not only give candidates a better job preview, they keep their attention focused on an activity that makes sense to them (while capturing key performance-related data). And if the test itself can’t be more engaging, it can be placed in a more interactive container, like a video arcade game.

 

 

 

 

 

The Interviewing Solution

The Interviewing Solution involves removing the implacably weak link in the selection interview value chain– the interviewer. After publishing the first research proving the potential power, writing the how-to book, and training countless hiring managers on behavioral interviewing, I have come to the conclusion that it’s not me (and my colleagues) who has failed. The notion that managers who hire intermittently and are rewarded for quarterly earnings will change from traditional to best behavioral interviewing practices has failed, and will continue to do so. Automating the interview is now possible, and should be done ASAP. The cost savings are clear. The boost in accuracy of about 15-25 points on top of that makes it a slam dunk.

Reducing Talent Risk

Corporations that have hired for years using the challenged screening and interviewing practices covered above are going to have considerable talent risk already in house. Some leave on their own. Some get fired. It’s the remaining Insider Risk that can cause catastrophic damage in regulated industries, and only immense damage in other sectors. Insider Risk causes executives to lose sleep. Here again two types of risk arise: (1) Insider Risk- risk of significant negative corporate outcomes when insiders violate corporate values and policies, or worse, state regulations or laws and (2) Hidden Talent-– risk of lost opportunity when highly competent persons fail to get moved into pivotal roles that deploy their considerable skills, either because they lack self -awareness/ confidence or because some middle manager keeps them stuck in roles where their strong performance lets the middle manager coast.

Both types of Talent Risk can be addressed through big data analytics that deploy Latent Semantic Indexing (LSI). This time, instead of indexing the text scraped from behavioral interview answers, the LSI engine chews through 500,000 digital documents per hour, scoring them on both malfeasance and competency constructs. Digital documents can include emails, texts, posts, presentations, papers, blogs, and online comments.

The result is a Behavioral Insight Risk Map. That’s what I call “Assessment without Assessing”. No one has been asked to fill out a survey or take a test to this point. Yet the C-Team can review the Behavioral Insight Risk Map, broken down by function, geography, and role, backed up with specific digital documents that bring the numerical analytics and quantitative benchmarks to life. And it can all take place within 30-60 days of senior leaders deciding to know vs. guess how much and where the biggest talent risks lie within a corporation.

The Behavioral Risk Map can then be cross referenced with valid psychometric measures of Risk Propensity and Competence Potential. The resulting two dimensional space leads to intelligent risk mitigation action plans, deploying resources where they will pay off. I will be able to share more fine grained process detail here post patent registration.

Engineering the LSI engine analytics process to maximize the detection of Insider Risk and Hidden Talent requires seasoned professional judgment and financial expertise. We have assembled a team working with Andy Fastow, the former Enron CFO, to maximize the power of the LSI engine when seeking out Insider Risk in digital document searches. Andy currently works with the FBI, plaintiff attorneys, and conducts speaking engagements on “Law vs. Loopholes”, all aimed at preventing or de-fusing toxic corporate cultures. Andy saw working with us a way to assess culture toxicity and then take focused action to correct it. We seek to connect with firms interested in Value Calibration engagements regarding incumbent Talent Risk as well.

Bottom line, firms can reduce Hiring Risk and mitigate their Talent Risk through LSI analytics. These methods cost orders of magnitude less than the brand damage, fines, avoidable turnover and damaged quality of life that goes with hoping Human Capital risk will go away, instead of measuring and acting on it.

 

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