"People analytics" should lead to better pay in all jobs

Anyone who reads Don Peck's deep dive into new advances in "the algorithmic assessment of workers' potential might be in varying degrees excited and disturbed by new means of predicting, assessing and improving performance. My chief reaction went in a different direction. The tests potentially highlight the huge performance differential in any type of work -- and hence, the value of good performance:

Teri Morse, the vice president for recruiting at Xerox Services, oversees hiring for the company’s 150 U.S. call and customer-care centers, which employ about 45,000 workers. When I spoke with her in July, she told me that as recently as 2010, Xerox had filled these positions through interviews and a few basic assessments conducted in the office—a typing test, for instance. Hiring managers would typically look for work experience in a similar role, but otherwise would just use their best judgment in evaluating candidates. In 2010, however, Xerox switched to an online evaluation that incorporates personality testing, cognitive-skill assessment,
and multiple-choice questions about how the applicant would handle specific scenarios that he or she might encounter on the job. An algorithm behind the evaluation analyzes the responses, along with factual information gleaned from the candidate’s application, and spits out a color-coded rating: red (poor candidate), yellow (middling), or green (hire away). Those candidates who score best, I learned, tend to exhibit a creative but not overly inquisitive personality, and participate in at least one but not more than four social networks, among many other factors. (Previous experience, one of the few criteria that Xerox had explicitly screened for in the past, turns out to have no bearing on either productivity or retention. Distance between home and work, on the other hand, is strongly associated with employee engagement and retention.)

When Xerox started using the score in its hiring decisions, the quality of its hires immediately improved. The rate of attrition fell by 20 percent in the initial pilot period, and over time, the number of promotions rose.

I'm glad that promotion rates are treated as a measure of hiring success.  While call center work is hardly the lowest skill or lowest status work available, these test results suggest to me that no work is truly menial, that employers can unlock value by finding the right person for any job, and that doing so should make it possible to pay people better and create better workplace conditions. Peck's article focuses in part on algorithmic tools that some companies are using to find talented people lacking standard credentials like college degrees. That's great. But what about using new tools to find -- and reward -- people who really love cleaning, or fine-motor assembly, or short order cooking? (One aptitude test, a video game called Wasabi Waiter, suggests that fulfilling complex customer orders swiftly requires high-level cognitive skills)

Performance is a funny thing. In my teens and early twenties, I know I performed really well as a janitor and pretty poorly as a waiter.  I was really good packing up products in a shipping room, but frustratingly slow (no match for Danish girls) picking oranges.

Peck's vignettes about finding people well-matched to their jobs made me think of Richard Florida's argument that good jobs are a product of political and cultural decisions as well as macroeconomics:

The problem is that on average, service workers earn only half of what factory workers make – and only a third of what professional, technical and knowledge workers are paid. The key is to upgrade these jobs and turn them into adequate replacements for the higher-paying blue-collar jobs that have been destroyed.

It has happened before. Yet the blue-collar jobs we pine for were not always good jobs: we made them good jobs. When my father came back from the second world war, his poorly paid factory job had been transformed. He was able to buy a house, put his two sons through college and participate fully in the American dream. Some of this was due to the power of unions. Most of it was because of the enormous improvements in productivity wrought by improved technologies and management techniques.

The same thing can and must happen in the service sector. It is starting already. Companies such as Wegmans, Whole Foods, the Container Store, Best Buy and Zappos already account for a fifth of the top 100 best places to work in America. A typical hourly worker at the Container Store earns about $30,000 a year, not nearly as much as a GM factory worker but about 50 per cent more than the average for hourly-wage retail workers. Retail outlet Trader Joe’s mandates that full-time workers earn at least their community’s median household income, while its “store captains” can make six-figure salaries. These companies recognise that better conditions lead to better customer experiences – and an improved bottom line.

A century ago the US government set up an Agriculture Extension Service, designed to provide technical assistance to farmers. In our own day programmes such as the Malcolm Baldridge Award for Quality and ISO certification initiatives help to spread ideas throughout the manufacturing sector. Service jobs are the last frontier of inefficiency,providing abundant low-hanging fruit for the innovation and productivity improvements that can undergird higher wages. Yet they have no comparable assistance.

It should be easier to pay people well for all jobs if people are in the right jobs.  What's required is political will, and a business culture that distributes profits more equitably.