What is Performance-Based Hiring and Why It Works by Mile Živković on Apr 11, 2018

If you’re tired of bad hires and you don’t have time to waste on people who can’t do their job, perhaps it’s time to try performance-based hiring. Here’s what it is and how you can use it in your hiring efforts to find the best talent out there.

PS! To help you get started, we put together this easy-to-use spreadsheet with performance-based hiring checklist and template. Grab your free copy from the link below!

What is performance-based hiring?

The term was coined by Lou Adler of the Adler Group, and it simply means hiring people based on how they perform at a job and not how they present themselves on paper or in an interview. It’s meant as a method for filling critical positions in teams with the best people for the job – and attracting the top talent in the job market.

As Mr. Adler has noticed, in most cases, top performers are not so easy to find. This is primarily because of the fact that they already have work and they’re not looking to switch teams. They are motivated by opportunities for growth, learning new skills and taking on challenges. In other words, they’re the ideal employees, regardless of industry or position.

Performance-based hiring means hiring people based on how they perform a job and not how they present themselves on paper or in an interview.

Trouble is, it is not exactly easy to make top talent come to you. They won’t be too happy about looking through job boards, filling out forms and adapting their CVs. To catch the top talent, the entire hiring process needs to suit the best applicants, and this can be done with performance-based hiring.

How does performance-based hiring work?

In order to get the very top of the talent pool, the hiring process should be focused on one thing only – the way the candidate performs in a given role. Furthermore, the application should meet the needs of top-quality employees. This means that each step of the way is intuitive, easy to use and geared towards results. 

The basic elements involve:

  1. writing a performance-based job description 
  2. sourcing passive, high-quality talent with a compelling job ad
  3. checking candidate’s basic skills immediately 
  4. reviewing the candidates objectively
  5. conducting a performance-based interview with the top 5% of candidates

Here’s a step-by-step guide on how to do it.

1. Write a performance-based job description

The difference between an average and a great job description is pretty clear: 

An average job description focuses on the person and their traits, while a great one focuses on what they can deliver at the end of the day.

As the creator of the term, Lou Adler has said that many employers get stuck on finding their purple squirrel in terms of a list of skills, achievements, experiences, character traits and other factors. However, as he says, just because someone has all these skills, they won’t necessarily be competent and willing to do the work.

A performance-based job description defines the work that needs to be done, not the person doing it. You may think that a lot of job descriptions already do this, but most are fairly vague. A performance-based job description lists exactly what a candidate needs to be able to do. 

Here are some simple examples:

  • SEO manager – increase organic traffic by 200% by end of the year; get 5 high-quality backlinks per week
  • Public relations officer – make 10 presentations per month to key personnel; provide a weekly report on media coverage
  • Sales development representative – make 70 outbound calls per day; get 20 qualified leads per month
  • Graphic designer – complete 10 client logos in one month; complete one website redesign per week

A performance-based job description defines the work that needs to be done, not the person doing it.

The secret to writing a well-outlined performance-based job description is this:

  1. Write down all the expectations for a new employee
  2. Define the tasks of a new employee
  3. Turn this into a short, well-outlined performance-based job description

If I were to hire a writer today, the job description would go something like this:

Looking for a full-time content writer and professional wordsmith. Requirements:

  • Writes a minimum of 1,500 words of engaging content per day
  • Uses best SEO practices (keyword optimization, meta descriptions, image alt descriptions, heading formatting)
  • Writes original copy that passes Copyscape 100% of the time
  • Proficiently uses WordPress for post creation and Yoast plugin for formatting
  • Consistently writes copy that scores 60.0-70.0 on the Flesch–Kincaid reading test
  • Requires minimum editing and proofreading and knows their grammar and spelling

The benefits of this approach are twofold. First, you will put off candidates that think they cannot achieve the required goals. Second, you will attract those who consider these goals a challenge. In this way, you ensure that you are getting the best people for the job.

2. Source passive candidates in a new way

Finding the absolute best employees out there is incredibly hard. And it’s no wonder – the cream of the crop is gone from the job market in just 10 days. However, there’s an abundance of great people – you just have to know where to look. About 85% of all the workforce are passive candidates. This means they’re not going out of their way to apply for jobs, but they wouldn’t mind switching teams if they get the right offer.

Passive candidates would love to snap a new opportunity to find great work. At the same time, they’re put off by lengthy applications, forms, and CVs. That’s why the application process should not feel like a process at all.

At Hundred5, we created a tool that allows you to test and screen candidates with a range of questions. Once you have a test up and running, you can promote it on your social media channel of choice. When we were hiring an SEO manager, we promoted the ads for the test on Facebook and LinkedIn. With proper targeting, you can get amazing results.

Passive candidates are put off by lengthy applications, forms and CVs. That’s why the application process should not feel like a process at all.

The majority of employees currently working for Toggl, our sister company, were passive candidates before they were hired.

3. Check the basic skills immediately

As I’m a writer, I was involved in hiring new writers several times in my career. Besides their CV, I always asked for a sample of their work. The idea is to get a feel if someone has the basic skills needed to write well. If they can’t spell, they have horrible grammar, their sentences have poor structure – they probably aren’t a good fit. It doesn’t take more than a couple hundred words to know this.

Previously written and published pieces are good, but I wanted something unique for the occasion so I ask the candidates to write something for me. I hate wasting people’s time, so it was never more than a couple hundred words. 

Trouble is – the candidate can fake it. They can have someone else write it, copy from the web, rewrite others’ work etc. If you use an app such as Hundred5, the application is timed from the moment the applicant starts it. This means there’s a limited timeframe for the candidate to provide a writing sample.

This way I can check for the basic skills at the start of the hiring process. As a result, I can eliminate a big pool of candidates that absolutely don’t fit the bill. I can devote my time to those who do and call them up for an interview. 

You can replicate this with any position you’re looking to fill, whether it’s a developer, architect, designer, or whatever comes to your mind.

4. Conduct a performance-based interview

If you’ve managed to look at CVs objectively, there is another part of the hiring process that needs to be based on performance – the interview. 

Many employers and hiring managers easily get carried away by their impression of the candidate instead of their performance. As Mr. Adler claims, employers often let emotions guide their hiring decisions. They find what they think is the ideal candidate and do their best to ensure that this person accepts their offer. On the other hand, the candidates themselves aren’t too good at directing questions so that they are assessed properly.

The goal of a performance-based interview is to put the focus on achievements and inform the candidate about the specific requirements of the position.

In order to focus the interview on performance as well, Lou Adler suggests something pretty unconventional – a pre-arranged interview between the candidate and the hiring manager. In other words, the candidate gets to know the questions before the interview even takes place. Sounds crazy? Perhaps, but that’s only on the surface.

In his teaching, Lou Adler identifies a total of 8 steps to a successful performance-based interview, but they can be boiled down to three most important elements.

  • The candidate presents themselves and their work history. They lay out each of the positions along with candidate’s most important accomplishments and see how relevant they are for the position they are currently applying for.
  • The candidate asks questions relevant to the position.
  • The hiring manager tests the candidate using a problem-solving situation related to the position.

The goal of a performance-based interview is to put the focus on achievements and inform the candidate about the specific requirements of the position.

Why should you use performance-based hiring?

If you followed along so far, the question you’re really asking is probably – why am I not using performance-based hiring already? As a hiring process, it ensures getting the absolute best people for a given job, every time. It also ensures that you are objective in your hiring decisions and that you are not wooed by CVs or presentation skills in an interview.

According to a recent survey, over 75% of employers admit to hiring the wrong person for the job. In terms of finances, that translates to anywhere between $17,000 and $50,000 lost per one bad hire. If you’re looking to fill a large number of openings, you could be in for an enormous loss.

With these numbers in mind, it is absolutely crucial to hire the best people from the very start. If you make a poor hiring decision, there are two ways out. First, you quickly fire the newly-hired employee and restart the hiring process. Second, you keep them and work hard on making them the right person for the job. Whichever the situation, it is far from optimal.

Performance-based hiring sample questions

During the hiring process, you will have the chance to ask your candidate questions regarding the position. Whether it’s during the application or the interview, make sure the questions are aligned with the job description. In other words, the questions should reflect the goals listed. For example:

  • Writer – What have you published lately that is relevant to this position?
  • Software developer – Which apps have you recently worked on?
  • Project manager – How did you improve efficiency in your team in your last position?
  • Social media manager – What kind of social media campaigns have you led recently and what kind of results have you achieved?
  • SEO manager – What changes in top keyword rankings have you made for your previous clients, and how many backlinks were you able to get?

By asking questions like these, you judge candidates based on what they have done so far and not on the skills they have on paper. Hint: you can ask questions like these using Hundred5 in your next hiring effort.

Recommended further reading

To get familiar with the basics, the first place you should check out is Lou Adler’s website. Most of the content is gated, so you will need to register in order to get access. Mr. Adler also publishes extensively on LinkedIn, so you might want to follow him there as well. For those keener on reading from paper, you can pick up Lou’s book on Amazon. Finally, this article on Fortune.com lays out the problems with job descriptions as part of the hiring process.

Start using performance-based hiring with Hundred5

If you’re looking for a hiring tool based on skills, your business needs Hundred5. Going by the motto that the best products are built to solve a problem and not make a profit, we created Hundred5 some time ago. Our sister company Toggl was struggling to hire new people, and Hundred5 was just what the doctor ordered. 68 new employees later, it is the hiring tool of choice for Toggl – and hopefully for you too.

If you want to start with performance-based hiring today, give Hundred5 a try. No risks involved – you can get started completely free. 

P.S. We promised a free template, here it is.

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