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In the world of Human Resources and Talent, measurement is essential to find the most suitable candidates. Just as when we want to buy a car and we check its metrics or how its features match our requirements (a sportive car is great, but often not practical), the recruitment process must reliably measure the candidates’ attributes and check their fit with the role they want to fill.
To date, the most used method in recruitment processes is self-reported questionnaires. However, the use of self-reported measures has been recently criticized. In the same way that people always want to post on social networks our healthiest version (a cute picture of a salad after a workout), in self-reported questionnaires we tend to state what is socially desirable, or what we expect our interviewers to be looking for. This phenomenon is called “social desirability bias”. Social desirability bias is the tendency to underreport socially undesirable attitudes and behaviors and to overreport more desirable attributes (Latkin et al., 2017). Thus, as you could imagine, this bias prevents recruiters from exploring talents fitting in your company. Indeed, 78% of job applicants hide some information during the hiring process by exaggerating competencies or deviating the answer from their true preferences. Moreover, candidates often distort their responses unconsciously, as mentioned, to please someone or even themselves. In that case, then how can you recognize what to believe?
For some time now, a new methodological current has been developing in the academic world that tries to solve this problem. The answer is simple: make people choose. Economic Games (EGs) in which preferences are assessed from people’s choices have become the gold standard in academic research in recent years (Thielmann et al., 2021). The main difference between these two paradigms is that whereas traditional questionnaire tests ask for intentions, EGs make people reveal their real preferences through decision making. To give you a trivial example, it’s like if instead of asking you “How healthy do you eat?” I give you the choice between a salad and a hamburger. What is important here is that the latter captures a behavior, not an intention (or belief).
In this type of decision-making assessments, choices need to be incentivized, that is, they need to be real. Usually, money is the best incentive because it has the same value for everybody (purchase power) and satisfies the property of “monotonicity” (the more, the better). Therefore, money is by far the best currency to incentivize people to make considerate and comparable decisions. Lastly, another feature that makes EGs an optimal tool to assess people’s preferences is the abstract scenarios they propose. EGs do not ask explicitly what they are trying to capture, so for participants it is hard to adjust their choices to what they think they are expected to do. Thus, “social desirability bias” is somehow controlled for.
In short, it’s obvious that questionnaires are no longer the state of the art in academic research. EGs have overcome some of the criticism raised against surveys and even though EGs were born within the fields of Behavioral and Experimental Economics, they are now extensively used across disciplines, from Psychology to Anthropology and Biology. No doubt, employee assessments should follow the same path.
Economic Games in practice
Too much theory? Let’s Kodo People introduce you to practice where EGs reveal their backbone.
Have you perhaps heard about the booby trap “Don’t pick too quick”? If not, the rule is simple: there are, in total, 100 boxes in which 99 contain €1 and only 1 has the dangerous bomb. You earn 1 euro for every box opened, but if you open the box with the bomb, you gain nothing. This is a neat lottery-like EG.
Here, the link between the currency and the decision is straightforward. The abstract, numerical nature of the game (“in each choice you can gain €1 but there’s a known probability to lose everything”) allows avoiding possible confounding factors such as cognitive abilities to perform an unbiased assessment. Therefore, observing players’ behavior can tell you about their preference for risk.
Compare this choice-based assessment of risk preference with a question like, “Do you think you are a risk-loving or a risk-averse person?”. Because the way the question is framed, per se, has already primed respondents the way they should answer. If someone is targeting a vacancy in a hedge fund, for instance, s/he has incentive to say “I’m a risk-lover” to shape the profile fitting the job description, regardless of the real preferences. That’s why assessments based on a person’s subjective speech normally suffer from self-report biases. Put differently, questionnaires try to infer people’s future behavior indirectly from their answers. In this line, Kodo People’s assessment reveals employees’ intrinsic behavior through their actual choices, because we know that past behavior is the best predictor of future behavior.
Let’s go through another real example. What would you choose: To receive €100 now or €120 in one month? This kind of dilemma reveals people’s time preferences. People who tend to take immediate deals are likely to be short-term oriented, whereas those who are willing to wait some time to increase the reward would be considered more long-term oriented. One of the most used games to measure time preferences is the multiple price list game, wherein participants choose between pairs of options varying the reward and the time of delivery. In this way, companies can know whether their employees are more likely to focus on short-term rewards or long-term rewards. This is of utter importance because not all the roles or company cultures suit equally well for short-term or long-term oriented people.
To sum up, Economic Games set an excellent opportunity for measuring people’s behavior dodging typical confounds such as desirability and self-over/misrepresentation bias. The use of real monetary incentives allows observing people’s actual behaviors, avoiding projections or simple intentions which might not be real. For these reasons, we developed Kodo People as the first TA software that is based on incentive compatible EGs. We aim to help recruiters to find the right talent for their companies and we are convinced that EGs are the best way to accomplish this crucial task. This advanced technique, on the ground of Behavioral Economics, will elevate your assessment processes and enable you to understand your people better.