Every new hire is a risk. The question is whether you’re measuring the potential reward against your investment. An argument for boosting that ratio through performance-based hiring.

Over my 30-year career in recruiting, I have found that, regardless of the employer, the industry or the decade, there is never enough money in the compensation budget to hire the very best people. So rather than compromise on quality, I reframe the conversation.

The challenge is this: Convince a job seeker to evaluate a new job as an important career move with a modest salary change, rather than a lateral transfer with a big compensation increase. In parallel, I have found I need to convince hiring managers to evaluate candidates based on their past performance and future potential, rather than some arbitrary level of skills and experiences.

This longer perspective has resulted in better jobs for strong candidates and built-to-last working relationships for hiring employers. Over time, this process became known as Performance-based Hiring.

How to Convert Jobs into Careers

Most job descriptions require candidates to meet a predefined list of skills, experiences, and competencies. These are bad ways to filter candidates. Instead, I ask hiring managers to define how a given skill, competency, or experience would be used on the job.

For example, if a new hire is required to have 5+ years of logistics experience and be an expert user in the FlexRPB supply chain system, the equivalent performance objective might be “to upgrade the entire inventory management and MRP system on a FlexRPB platform within 12 months.” Every job has 5-6 performance objectives like this that represent the bulk of the work. I refer to this list as a performance-based job description.

With this list in hand, I ask the hiring manager to consider interviewing candiates who had performed similar high-quality work, even if they had a slightly different mix of skills and experience. Most instantly agree. I ask the remainder to compare a few candidates who meet the performance requirements with a few who do not, but have the necessary skills and experiences. In the vast majority of cases, candidates judged on past performance trump those with the right pedigree.

Selling Candidates On the Promise of Promise

First, I compare the candidate’s past performance to the performance-based job description. (This is how the Two-question Performance-based Interview was developed.) I then sell any gaps between the two as a career move.

For example, if a candidate hasn’t led as big a project or team, or is in a different industry, or isn’t using as much advanced technology, or doesn’t have as much visibility, the job can be presented as more challenging, more satisfying one offering more upside potential (of course this all had to be true and tied to specific evidence). Collectively, this “opportunity gap” then becomes the tradeoff for a modest salary increase.

I first started using this reframing process when one of my first candidates rejected an offer for a plant manager job. When I asked him why he’d accepted a competing offer, he said the financial package was bigger, the company was closer to home, and he wanted a VP Manufacturing title. Although stunned, I blurted out something like, “Are you aware you just made a major long-term career decision using short-term data?”

I then went on to explain how the job he was rejecting had more upside opportunity, the work itself was more challenging, reporting to the CEO was better than reporting to a VP Operations, and a 5 percent difference in compensation was insignificant, since my client’s company was growing much faster. I then asked him to think it all over.

The candidate called me the next morning, profusely thanked me for getting him to examine both opportunities as a business decision rather than an emotional one, and accepted my client’s offer. Eight months later he called and thanked me again. He told me he was just named the VP Operations, earned a special bonus, and got a significant increase in pay.

In the rush to accept a job or fill one, there is always too much emphasis on what people must have to even be considered or what someone must get to even be interested. When the focus switches to what people will be doing and what they could become if they do it well, the whole decision process is reversed. Hiring a person or accepting a job is an important long-term decision. Don’t use short-term data to make it.