Ben Schwencke, Business Psychologist, Test Partnership
One of the key issues where HR and hiring managers often disagree is whether to hire for potential or experience. The goals of HR are strategic, tied to organisational performance and workforce planning, meaning they can afford to be patient. Hiring managers, however, need productive employees right now, likely well before right now.
However, there is a cost associated with hiring people based solely on their current level of competence. Just because someone has experience does not mean they have the potential to improve, advance, or excel; they may remain mediocre forever (or even worse, fall behind over time).
High potential employees, on the other hand, may not be stellar performers on day one, but they have all the cognitive and behavioural requisites to become stellar eventually. Again, this could come at the expense of the here and now, as inexperienced high potential hires do need some ramp time.
In this article, I will outline why hiring for potential is almost always the better option, and why potential is so much more valuable than experience.
Smart employees quickly eclipse experienced employees
Cognitive ability is broadly defined as the ability to learn and solve problems. It underpins performance in every role, at every level, in every organisation. Moreover, in cognitively complex work specifically, cognitive ability is the strongest predictor of performance known—nothing else can match it (Bertua et al., 2005).
Experience, on the other hand, is a far weaker predictor of performance, especially over the long term. We know that the first 5 years make the most difference, showing a moderate association with performance (Schmidt & Hunter, 1998). However, after the first 5 years, the association drops to nearly zero, meaning further experience simply doesn’t add any predictive power.
This means that cognitive ability is, empirically, a more important indicator of performance than experience, and that is particularly true after the first 5 years of experience.
There are many reasons why this would be the case. Firstly, smarter employees acquire skills faster than less smart employees, quickly eclipsing experienced but less cognitively able colleagues. Smarter employees also solve problems more effectively, meaning they can apply learned knowledge more effectively once they have acquired it. Lastly, smarter employees benefit more from training and experience, meaning they won’t need as much of it in order to become productive.
Ultimately, high potential employees will inevitably outperform experienced but low potential employees eventually, and likely faster than you would think.
Personality predicts attrition, experience doesn’t
The other side of employee potential is the alignment between the individual’s behavioural disposition and the role itself. Different roles tend to favour certain personality characteristics more than others, meaning each role has an ideal profile.
For example, extraverts are more likely to see greater performance and engagement in sales than introverts, but the opposite may be true in software engineering. This alignment is key, otherwise people will be at risk of attrition.
Indeed, personality traits rank among the strongest predictors of retention and attrition known, and their impact on hiring outcomes shouldn’t be ignored.
Prior experience, however, does not show a consistent relationship with retention or attrition. Having done a similar task in the past does not suggest that they will stay in future, or that they will find that role fulfilling or engaging.
This matters far more than many hiring managers realise, as the costs associated with attrition can be considerable. Moreover, attrition is surprisingly easy to predict using behavioural assessments, giving an early warning to a potentially short tenure.
When does experience matter most?
In the vast majority of roles, the trade-off between potential and experience does favour potential, but only when employees are given time to find their feet. In many roles, particularly contract and freelance roles, no training or onboarding is provided—they have to hit the ground running.
In this instance, hiring specifically for experience does make more sense, as their tenure is expected to be short anyway. Attrition just isn’t the same concern for temporary workers as with permanent staff, making behavioural fit less important.
Additionally, because training isn’t going to be offered, higher levels of cognitive ability are inherently less advantageous. If a freelancer can’t do the job right now, they simply shouldn’t have been hired. However, for permanent employees, particularly early careers or those entering management for the first time, the opposite holds true as development is expected.
Another instance where experience is likely a better bet is when you suspect applicants simply won’t complete any assessments as part of a recruitment process. Even if those assessments would be technically optimal, candidate experience and attrition is always a concern, particularly for niche roles where applicants have a great deal of power. In this situation, experience may be the only thing you can rely on, even if hiring for potential would theoretically be a better move.
Summary and final thoughts
Whether or not you agree that hiring for potential is better than hiring for experience, I think it’s safe to say that organisations do overvalue experience. Salaries and promotion prospects are determined almost entirely based on experience, despite the low performance premium that experience offers. Potential, however, is largely irrelevant to salary and promotion prospects, representing a fundamental flaw in the hiring market.
Now naturally, one can hire both for experience and potential, as both can be incorporated into a selection decision. It doesn’t have to be a binary decision, as organisations can use pre-employment tests along with experience requirements. This is particularly true when hiring relatively junior staff, as those first 5 years of experience seem to matter the most.
Lastly and more insidiously, one of the reasons why certain hiring managers seem against hiring for potential is because they feel threatened. I have had many conversations with hiring managers who felt uncomfortable hiring candidates who outperformed them on assessments, especially if the manager themselves significantly underperformed.
Ultimately, hiring manager insecurity isn’t a justification for sabotaging your own selection processes. Instead, HR needs to ensure that hiring decisions are optimised, and this almost always means hiring for potential rather than experience.