Hire faster

In the primitive early days of blogging, before our leading minds discovered that food is the ideal metaphor to explain data and analytics, the supply chain was set up backwards, with economists writing literally about food.

In that era, I was living in Washington, D.C., where I became acquainted with the work of Tyler Cowen and Megan McArdle, two area residents who wrote regularly on cooking, eating, and classical liberal economics.

Cowen still produces, among many other products, the eclectic blog Marginal Revolution and an excellent online guide to D.C.-area ethnic dining. He summarized much of his economics-based food advice in the 2012 book An Economist Gets Lunch. McArdle these days writes about economics, politics, and food for The Washington Post, and previously wrote for The Economist and Bloomberg View.

Some highlights from their advice about cooking at home and eating out:

1. When looking for good restaurants in a new town, Cowen advises you not to go to the most expensive areas. Look for clusters of ethnic restaurants in low-rent areas (such as suburban strip malls) not far from high-rent customers, and try the dishes that look least appealing as opposed to the dishes that strike you as most familiar.
2. As we discussed in our previous article, a valuable skill is meta-rationality: to know the limits of your knowledge. In restaurants, as elsewhere, you should know when to ask other people for help. Cowen has a specific, occult phrase he likes to use when asking waiters for a recommendation. (Read the book or send me a note to find out what it is.)
3. McArdle advises diners to “always order one extra dish at a restaurant, an unfamiliar one. You might like it, which would be splendid. If you don’t like it, all you lost was a couple of bucks.” The option value comes from possibly discovering a great dish to keep ordering forevermore, while the downside is capped.
4. McArdle also recommends that you keep a set of cookbooks that have stood the test of time, such as Betty Crocker’s Picture Cook Book, first published in 1950 and said to be the highest-selling cookbook in American history. Flag a set of recipes that you intend to try—more than usual since you’re stuck at home and have a lot more home cooking to do.

Reviewing this body of work should get you thinking about business analytics and how to find the right people for your team. The distancing rules imposed due to COVID-19 have changed the way we eat and the way we hire—making both activities a less meet-in-person experience—but some facts about hiring have remained constant.

Analytics leaders are subject to the same biases as other hiring managers. First, they overestimate the accuracy of their interview process: how well they can eliminate false positives and false negatives to efficiently find well-qualified analytics team members. Second, they err on the side of caution due to information asymmetry; many candidates overstate their capabilities, and the cost of a full-time hiring mistake is salient (though parting ways with this person need not be all that painful).

What’s harder to see, and more difficult to measure, is the opportunity cost of not having the extra business analyst. There is a body of analytical work that is not getting done, additional workload and stress on the rest of the team, and a set of missed innovations that the unhired new person would have brought.

Despite the many competent business analysts you have today, hiring one more is nearly always an ROI-positive move. If you don’t believe this, you may be undercounting the less-tangible benefits of business analytics.

Let’s say, due to growth and attrition, you need to hire one business analyst per month. With a rapid hiring process, your base rate of making false-positive hiring mistakes is, oh, 1 in 6. What if, by taking two extra months to fill each position, running candidates through extra rounds of interviews and test projects and background checks, you could get the error rate down to 1 in 12? In a year’s worth of hires, with your precision raised from 83% to 92%, you would have to replace just one of the new hires instead of two, which seems like a win.

But since the slow mode takes two extra months to fill each vacancy, you’re missing two people the whole time! This makes the total capacity of your team lower than in the rapid mode. (This argument hearkens back to yet another classical liberal economist, Frédéric Bastiat, and his essay “That Which Is Seen and That Which Is Not Seen.” I don’t know what foods Bastiat would have blogged about in 1850, but as a native of Bayonne, he probably had an eye for a good jambon.)

People focus on the cost of the extra hiring mistake: unwinding the relationship and going through another round of recruiting, onboarding, and training. Human Resources will even give you a helpful dollar estimate of the typical “seen” costs, leaving you to fend for yourself on the unseen ones.

Applying the lessons of our foodie economists to the problem of hiring business analysts, we can conclude:

1. Don’t overemphasize credentials such as the most prestigious schools and prior employers. Take a close look at candidates from second-tier schools and jobs, especially ones that are geographically proximate to the top-tier ones.
2. Acknowledge the limits of your interviewing accuracy. For a given candidate, try to get references through your own network, finding people who have spent significant time with the candidate in real-world conditions and can give you an independent point of view.
3. Move quickly and have a bias for bringing more candidates into the organization, whether full time, as contractors, or (ideally) in a contract-to-hire setup. The latter option is generally worth paying for, even if your organization traditionally is resistant to bringing in contingent workers. By all means, enforce a quality bar—but ask yourself if every incremental hiring hurdle is really contributing to your accuracy.
4. Finally, keep a set of cookbooks and recipes on hand: a set of discrete but straightforward analytics projects that new colleagues can tackle quickly, adding value while demonstrating their soft and hard skills. This is where alternative data comes in handy: a talented new colleague can quickly run outside-in analyses about your company and its competitors, and derive actionable insights.

Cowen argues that the COVID crisis has landed us in a temporary dining paradise: the chef is in the house, cooking the restaurant’s best dishes for a smaller and more particular crowd. It’s a great time to go early, take food out, and eat it nearby. In the talent market you may similarly find excellent opportunities if you adopt a bias toward rapid hiring and contracting. You can get a competitive advantage by trying new things, buying low, and growing talent over time.

This article first appeared on the Braff & Co. blog at braff.co/advice. Subscribe for automatic updates.