HR specialist John Sullivan makes a powerful point in How candidate abuse Is costing your firm millions of dollars in revenue.

He says companies have raised monitoring customer satisfaction to a science. They know the exact cost of getting a customer, upsetting a customer and losing a customer.

But when it comes to hiring workers, they deliver a poor candidate experience and this ends up costing them dearly.

Sullivan says;

I estimate that the average professional candidate voluntarily spends more than $1,000 worth of their own time and money in preparing for and participating in an organization’s hiring process. Given that level of investment, they deserve to be treated like good customers.

It’s a long piece with plenty of detail, and he provides a list of 20 negatives from poor hiring practices. In my book two stand out.

First, abused candidates turn into enemies. Not only will they not buy the company’s products, but they actively lobby against others buying those products. This is especially harmful to companies operating in business-to-business markets where individual orders are large.

Second, the best candidates – which also means the best employees – don’t need to put up with being jerked around by dumb processes. They’ll walk away from stupidity. So over time a company with poor hiring practices will only get second-rate people.

Human Resources Leader says companies not planning to replace staff sacked during the economic downturn may see a “decrease in the quality and sustainability of knowledge workers’ performance”. It quotes research showing knowledge workers are “buckling under” the extra pressure.

This is basic stuff, but it shows HR professionals are at least aware of the problems created when businesses cut too many staff.

I say large companies who cut staff in the downturn will struggle to recover the lost skills. What’s more, many savvy knowledge workers will avoid these employers in future.

Knowledge workers doing the work of three people

Companies everywhere are laying off workers as they struggle to cut costs in the wake of the recession. But are they sacking the right people?

It has long been accepted wisdom that older workers are the first to go in a downturn. Plenty of evidence says this approach doesn’t make sense.

For example research carried out by Hewitt Associates in 2007 found older Canadian workers are more emotionally and intellectually committed to their work than younger employees. Employees over the age of 61 are the most committed and commitment levels drop progressively with age. The least committed age group was for employees between 26 and 40, younger employees are slightly more committed.

In other words, the workers at the front of the redundancy queue are the people who care most about what they are doing. (There’s also evidence these older workers are the people who are the most skilled and are repositories of a company’s collective knowledge-base).

As Steve Roesler at My Venture Pad points out: “using  "age" or "years of service" as overarching drivers for these decisions might come back to haunt employers later.”

According to some estimates, half the professionals working in information technology are contractors. Other knowledge industries also use huge numbers of non-payroll workers.

For example many public relations positions are now contract-based, freelance journalists and graphic designers are everywhere and in many cases even marketing, HR, legal and accounting positions have moved outside the corporate core.

Efficient in theory

In theory this is because pushing workers out of the core is more efficient. On the surface, the idea is companies save money by moving highly specific and infrequently required skills outside the core business and then buy them back as needed. It's closely linked with the move towards outsourcing.

Ironically, it’s not unusual for companies to lay-off workers with a sizable payout and then contract them to do the same job with higher pay. From an economic point of view, this gets even sillier if that worker is contracted through an agency or third-party who then adds commission to the costs.

In extreme cases the employee who originally worked a 60-hour week for a salary that officially brought 40 hours of their time is now paid for the full 60 hours. In other words, this practice can cost a company twice as much to buy the same productivity.

Mad employment practices?

We’ve all heard stories of these things happening. Two things explain these seemingly mad practices:

First, there’s a simple accounting trick. By moving labour costs from one side of the ledger to another, companies can look more profitable.

At the same time, companies can reduce the liabilities associated with employees – which improves the bottom line.

Then there’s the macho, investment-driven thing. For a long time in the 80s and 90s investors and market analysts viewed cutting a company’s headcount as a proxy for business or managerial efficiency. As managers trim staff numbers, share prices rise. To some extent this still holds. We won’t bother to analyse whether trimming staff numbers this way is a wise long-term move.

Contracting in decline

In recent years there have been signs the trend towards contracting is declining as companies move to lock-up skilled workers by bringing them in-house. In other words, companies are pressuring certain type of contractor to return to the corporate fold.

This happened partly because companies can't always hire specialist skills when they need them – the waiting list for certain skills is long.

There are also fears about confidentiality and exclusivity. It’s not that consultants tell tales out of school or that they cheat, it’s more that, you can hardly employ someone on a top-secret project for six months and then have them walk down the road and do the same job for a competitor. Stopping them isn’t practical and potentially counter-productive.

Unreasonable demands

In my work as a writer, some prospective employers make unreasonable demands – for example, they might ask for full indemnification against any legal costs arising from my writing. Others might want over-restrictive copyright clauses or stipulate I can’t write for their rivals within a set time – say,one year.

In practice I refuse to sign restrictive contracts – I can’t afford to have someone who is paying me for a $2000 job to stop me earning $100,000 elsewhere.

Nor am I daft enough to indemnify someone for vast sums over a job worth a few grand. In fact, the insurance premium I'd have to pay is greater than my earnings. Remember the knowledge worker credo – there is enough good, well-paid work, out there for you to bypass all the rubbish.

From the employer point of view, only desperate contractors will enter restrictive contracts – not the kind you’d want to hire. Another reason employers are snapping up experts is that by doing so, they can deny their services to their rivals and steal a march

Psychometric testing is controversial – yet it's popular with human resource managers and recruiters. They see it as a quick and efficient way of sorting people.

From their point of view the issue is simple; a recruit’s CV, interviews and references tell managers about a person’s skills, experience and functional ability. It is harder to get important objective information about personality – in particular a candidate's ability to mesh with a corporate culture.

That's the sales pitch. In reality stressed recruiters use a barrage of different tests, including psychometrics, to speed up hiring.

Some tests are automated. Candidates sit at computers – perhaps in a recruitment company’s offices – and work through on-screen tests. In other cases the tests are paper based and professionals supervise the testing.

At a senior level these tests are a waste of time without a qualified and experienced professional taking charge. The results are complex to interpret and sensible analysis is beyond the scope of a layperson.

It might be fine to hire a cleaner on the basis of an automated test, but not a knowledge worker.

My psychometric test experience

I experienced psychometric testing in the 1990s. After a series of intense interviews for a senior position I took the tests. The session lasted for around four hours, almost without a break. In my case I warmed up with what looked like IQ tests and moved on to logical reasoning exercises.

Next was a long and vaguely baffling exercise where I had to choose from seemingly random pairs of job titles in order of preference. For example, the test might pair 'janitor' and 'rocket scientist'.

Picking one of those two isn’t hard. In fact, the test was obviously designed for an American audience and included job descriptions that, while not incomprehensible, certainly were not familiar.

Finally there were the real psychometric tests – I suspect the job-ranking test might be a form of psychometric exercise too. Answering the questions isn’t difficult; the tester asked me not to think too hard but to go with my first response to any question.

By the end of the four-hour test session I was emotionally drained, physically exhausted, thirsty and hungry. After a 30-minute lunch break I returned for a task-specific question and answer session.

A few days later an industrial psychiatrist called me to discuss the tests. He discussed my longer-term career prospects and plans and made suggestions that I hadn’t otherwise considered.

I worried the tests might show me as an employment basket case – or worse. In fact the news was positive and insightful. It turns out I'm better at certain things that I previously thought. I got the job, but that’s another story.

Going on my experience, I see merit in this kind of testing. Personality is the most important factor when hiring an executive. It's more important than skills and experience and as important as aptitude. It is good to set up objective benchmarks that go beyond the kind of human prejudices we can all be, even unwittingly, guilty of.

The downside of psychometric testing

However, I have two concerns. First, despite what the professionals say, it is possible for people to learn how to answer psychometric tests in a way that portrays them in a favourable light. You can succeed at psychometric tests.

I once interviewed John Wareham a New Zealand-born recruitment guru who helped develop these tests, he said the trick people quickly learn is to avoid the extremes. Most tests ask you to rate things on a scale of 1 to 5 – if you want to get a good job make sure the bulk of your answers cluster around the centre of this range.

On the other hand minor alarm bells ring if you fail to tick any extreme answers. Wareham also said the tests quickly detect any dishonesty by cross-referencing, so answer truthfully or you’ll be exposed as a phony.

My second fear is that managers use it as a way of offloading decision-making responsibility. External objective measures are good, but they can’t make decisions. There’s a temptation to just look at printouts and test scores and not go beyond this to look at other, possibly more compelling, evidence.