Defaulting to Hire on Credentials Will Put You Out of Business

DEFAULTING TO HIRE ON CREDENTIALSWILLPUTYOUOUT OF BUSINESS

The authors at the Library of Economics and Liberty have been debating in the past few years about what exactly is the value of a college degree, and what it signals to the world. After listening to Arnold Kling talk about it again on the Econtalk podcast (fantastic podcast, by the way), I got particularly interested in putting some of these points together, to see if I could offer a relevant angle to both employers and future college graduates and employees alike.

On the podcast, Kling explains his colleague Bryan Caplan’s point of view, saying that going to college signals conformity to organizations that want you to be a conformist in order to work there:

“If you’re bright enough and conscientious enough to go to college but you don’t, you’re signaling that you’re willing to be different, that you don’t accept the norms of society. So, as an employer, I’ve got to worry. Sometimes you have to do something that doesn’t make sense to you but we do it because we do it in the organization, and it needs to get done because the organization demands it, and if you won’t do it, that’s gonna cause problems. […] Right now, not going to college sends a negative signal. You’ve demonstrated clearly that you’re a non-conformist in a world where in many organizations you need some level of conformity.”

This angle is rarely discussed with such honesty. To say that one needs to have a college degree in order to show that one’s willing to follow orders, even if they don’t make sense, means admitting a level of inefficiency in many organizations that’s not comfortable to expose. This may be too blunt to be acknowledged by people hiring or running organizations. It may not even be conscious.

The key in this argument, I believe, lies in not getting caught up in the value of degrees or college in general, but in how this signaling mechanism affects organizations and potential employees’ value to society in general. To analyze the value of the college degree from that perspective would be fruitful in order to improve an organization’s hiring philosophy. However, that’s easier said than done, says Kling, because the problem is rooted in the credentialists running the organizations:

“Education provides a signal about your support for credentialism—the belief that only people with proper credentials should be hired. If you go to college, you implicitly support credentialism—or at least you do not reject it. If you refuse to go to college, then you show disrespect for credentialism. That disrespect may represent a threat to hiring managers who are credentialist.”

In other words, what’s keeping the signaling model alive is not the universities but the credentialist wanting to hire other credentialists. Here’s Kling again:

“The more you want people to place a high value on your credentials, the more you will want to reward people who are credentialist and punish people who are not. If you are trying to use your Harvard MBA credential to climb the corporate ladder, then you want to hire people who are impressed by Harvard MBA’s, and you would feel threatened by people who are not impressed by Harvard MBA’s. Thus, you have the credentialism trap. Once people who are credentialist have power, then everyone who wants power has to bow toward credentialism.”

This credentialist pyramid scheme wasn’t necessarily a bad thing. Nothing wrong with an implicit organizational methodology, as long as it works and brings positive results to society.

It doesn’t anymore.

As I’ve argued before, for decades we were able to get away with many inefficient work practices, such as the signaling model. The 20th century was one with a lot of progress, but also a lot of waste. We bought tons of stuff, watched many hours of TV, got the minimum education necessary to get a job, sent as many resumés as we could, and posted broad descriptions of job openings. The underlying belief behind all those habits was that we have resources to spare.

However, we have more than enough examples that show us that that mindset is not sustainable. Furthermore, technology is forcing us to leave those practices behind, either by giving us cheaper and better ways of doing things, or by exposing the consequences of our impractical behavior (eg: learning about global warming).

In the past, things like timely and smooth execution of orders were probably more valued because we valued size and coordination. Companies grew by becoming bigger. Parts were seen, to a large extent, interchangeable. But there’s a shift happening. We’re just seeing the tip of the iceberg of the value and disruption computers and software can bring to our organizations.

I’ve heard many times people “joking” about how a particular software is their best employee. As computers get better at automation, the type of jobs where conformity and following orders are the most wanted traits are declining. In the past being a secretary, for example, may have been a relatively prestigious job that few people could do (typing fast, being good at organizing multiple streams of information, etc.). Nowadays, these are traits that either most people acquire organically or that technology does better than humans, so being a secretary does not offer the same prestige or benefits it did in the past. The same can be said for a big number of jobs.

This is why great designers, salesmen or computer programmers are still highly valued. Because we haven’t been able to get our computers to do it better than people yet. In fact, these are three fields where people demand degrees less than other types of jobs. Everyone understands that being great at sales or design hardly comes from the classroom. A software or design portfolio will trump any degree because if one plays dumb there, one would be quickly out of business.

As technology makes many people replaceable, the question starts to become less about replacing pegs, which you know you can find easily, and more about capturing star players.

I don’t want to debate what’s the long term future of work and technology. That’s way over my head. I want to stick to what I believe are the present habits of most organizations, and to that I say: inefficiency cannot be a guiding principle, regardless of how threatening or scary it feels to give up some control. This is no longer the century of comfort and waste, but of resilience and innovation.

That’s where entrepreneurship comes into play.

It’s no coincidence that all across the world entrepreneurship is making headlines and becoming a magnet for talent and resources. We all understand how important resilience and innovation are. That’s why we’re drawn (or pushed?) towards entrepreneurship. At its core, entrepreneurship is about resilience and innovation. Entrepreneurship is about solving problems and becoming efficient. On The Start-up of You, Reid Hoffman and Ben Casnocha give a thorough description of why we all need to behave like entrepreneurs now:

“The conditions in which entrepreneurs start and grow companies are the conditions we all now live in when fashioning a career.  Whether you’re working toward a promotion or simply trying to hold on to your job – you never know what’s going to happen next. Information is limited. Resources are tight. Competition is fierce. The world is changing. This means you need to be adapting all the time. And if you fail to adapt, no one – not your employer, not the government – is going to catch you when you fall.”

This century won’t be kind to the wasteful. Everyone needs to be resilient. Everyone needs to be able to innovate. Which brings us back to the signaling model adopted by many organizations today: employers and recruiters are no exception to the rule. They have to adopt entrepreneurial mindset to their hiring strategy too, and bring entrepreneurial people to their teams, or they won’t be able to adapt. Kling explains:

“I believe that the trend toward entrepreneurship may start to undermine credentialism. In addition, as economic change accelerates and people have to change careers more often, credentialism will be too large a source of friction.”

Credentialism’s friction will erode those organizations that refuse to adapt and give up some control.

There’s a question that begs to be asked: why shouldn’t people that want to join the workforce just get a degree then? It’d be a lot easier for any person to adapt to current organizations’ philosophy than to expect them to change because of him or her, regardless of how talented that person may be.

When facing this question, most people choose to conform to the signaling model. When you talk to many students, it’s normal to hear them saying things like “the piece of paper matters,” or “I don’t learn much, but I need it if I want to get a job.” There’s nothing wrong with that commitment, it’s exactly what Caplan and Kling talk about. The problem is that such a passive approach to professional development is almost exactly the opposite of what being an entrepreneur is about. An entrepreneur doesn’t have the luxury to be passive, because he understands that resources are scarce and competition is fierce. If organizations expect to innovate, they’re not going to find the entrepreneurial minds they need among these kind of graduates, which I believe is the majority of people in college.

This is not to say that there are no entrepreneurs coming out of college, but for them it’s usually a spirit that they already carry with them before attending university, even if they didn’t define themselves that way. It’s not college that turns them into entrepreneurs, rather than they being able to express their entrepreneurial energy once college’s boundaries and structure is gone. The fewer the rules, the more and entrepreneur can innovate, which is why great entrepreneurs thrive in the craziness of the real world. Where others see problems, they see opportunities.

And what about those that consider themselves entrepreneurs and innovative before attending college? Here it’s not a default decision to attend because they see more paths than just college, so they may consider it a sub-optimal decision. For them, college is weighed against many other possibilities, from taking a gap year to launching their own company, joining a startup or NGO, etc. His or her growth and success is not considered tied to a degree.

The reason for not going to college if one considers himself talented enough to make it as an entrepreneur is simple: it’s too expensive. Either because of money or time, college is not obvious for those that feel they can innovate in their professional lives and businesses. If you want to get these type of entrepreneurs in your company, you and your organization have to think and behave like entrepreneurs too, regardless of how uncomfortable it may feel.

The Start-up of You becomes The Start-up of “insert industry or company.”

At this point, I hope we can all agree that to keep hiring strictly on credentials is not good for an organization that wants to adapt and innovate. The question then is: why are we still doing it? Why are those in charge of organizations still defaulting to credentials-based hiring?

The answer lies in their need for normalcy, says Caplan:

Suppose you’re interviewing a smart guy, without a college degree, and he offers you a money-back guarantee. You might think “What a great deal” and accept. But then again, you might start thinking “What a weirdo. What’s wrong with him?” And this, I propose, is the stumbling block to lots of worthwhile innovations. A person with an unconventional idea may have a point, but is also unlikely to be “normal.” He may not fit it with other people. He may have problems with authority. He may be deviant in more ways than one!

He may, he may, he may… To be afraid of a potential employee for not being normal is a concern that stems from a fear of uncertainty, a healthy fear as long as one faces the actual problem, which is the need for control. To assume that unconventionality equals lack of discipline and problems with authority is very inaccurate. From what I’ve seen, what unconventionality signals is a reluctance with obeying authority blindly. Entrepreneurial minds are unconventional by definition, so a fear of unconventionality will end in rejecting all entrepreneurs that could join the organization.

I believe this fear towards unconventionality is not rooted in how the “weirdo” may harm the organizations, but in how he or she may force the employer to become unconventional himself by letting some uncertainty into the organization’s culture. Accepting uncertainty implies a commitment to hard work, change and growth, as opposed to surfing the wave of inertia and traditional practices and structures. This is where the real problem lies: employers making decisions in a comfortable way, as opposed to how the world is now demanding it. Becoming an entrepreneurial spirit after years or decades of sticking to rigid practices may be too hard. But entrepreneurs like to pair with other entrepreneurs, not just to fund companies.

If you want entrepreneurial blood in your organization, you must become an entrepreneur yourself. This is the real challenge that employers are facing. If we can overcome it, that may bring the inefficient signaling mindset down.

Let me clarify that I’m not saying one shouldn’t hire people with degrees. Many things are available only in college (for now), and many people become great BECAUSE of their time in university. Universities are a great thing!

What I’m saying is that organizations that blindly default to rigid filters of talent, in order to avoid doing the work required to find and keep the right people, will be out of business soon.

This is not an easy challenge. When one lets unconventional minds into an organization, the counter-party risk immediately increases. But one must not assume that such a risk invariably means lack of discipline, order and commitment. It’s critical not to misunderstand independence, free thinking and questioning with lack of responsibility and respect for hierarchies. A culture that combines the best practices of both the traditional organization and the new, more entrepreneurial one, is definitely within grasp. But it starts at the top, with the guy in charge leading the way.

Comfort cannot be chosen over results, because waste is not forgivable anymore. You can’t default to normalcy. The race is tight. If you want to innovate, or at least, stay up to date, you need people that go beyond expectations and question authority, even if that authority is you.

The extent to which an organization must change its hiring policies should change on a case-by-case basis. However, what every organization needs to have is the willingness to have an honest introspection about how they hire and why.