The financial industry uses a credit score to predict an individual’s credit risk. Could the recruiting industry be ready for a similar industry standard that consistently uses objective data to evaluate candidates?
This is the question Tigran Sloyan covers in Episode 3 of the #GoBeyondResumes video series. Tigran takes a trip to the FICO headquarters to speak with CEO Will Lansing and understand how a 200-year old industry matured to include credit scores.
If you look back at the credit industry, it has come a long way. According to the Fair Issac Corporation or FICO blog, the credit reporting practice began back in the 1800s’ for commercial lending. At the time, most of the lending was determined by judgment of character and as such, was an inaccurate representation of the true ability to determine a borrower’s lending risk. An alphanumeric system for credit evaluation was created shortly thereafter and in the 1900s’, consumers soon began to borrow, too. After the creation of the Fair Credit Reporting Act or FCRA in the 1970s’ and years of struggling to interpret credit data, the FICO score was established to serve as an “…industry-standard credit score (that included a consistent credit-scoring algorithm)”.
Will explains that 40 years later, the FICO score still “…determines the access to credit and the price of credit and now consumers are well-aware of what that means.” So much like recruiting, the old way of determining credit borrowing potential was based on what you could judge on paper or how much you knew someone, which could take years of experience to get right, if right at all. It didn’t tell the whole story.
Will goes on to say: “The thought that the founders of our company had was, we should make this more objective, science-based, let’s automate it, let’s lower the cost of this evaluation.” This makes complete sense. Why not take a more scientific approach and leverage data available, combined with expertise in evaluating certain consistent factors to determine the potential success rate of a candidate? Only in the recruiter’s case, it would be to hire them for the job, not lend money.
So what’s holding the recruiting industry back from this approach? Well for one, Will says a big challenge will be getting other recruiters to buy in to a certain evaluation method, accepting and using it as the industry standard. It took a few years for the FICO score to get the proper recognition and it was mostly because its results spoke for itself. Institutions that adopted the FICO score could prove that it worked because they had more good credit scores than their competitors who didn’t use FICO scores. Will points out that “…the most innovative companies jump on these kind of techniques and then the rest of the industry eventually follows.”
The good news for the recruiting industry is that the #GoBeyondResumes movement is pushing for a new industry standard to evaluate candidates. And more importantly, we don’t have to wait 40 years to make this the industry standard for recruiting. You can have first-mover advantage by joining the #GoBeyondResumes movement today and be in the lead for recruiting the best possible candidates for your organization.