Why your board must embrace open hiring

Nurole was built to change the way boards hire and transparency is at the heart of what we do. For too long, board hiring has been closed, secretive and opaque. Whether boards hired through their own networks or through a traditional search consultancy, it was a world of little black books, old boys’ networks and waiting to be tapped on the shoulder.

But times have changed, and board hiring has to change too. We now understand much more about what works and what doesn’t. By opening the process up to the widest possible range of qualified candidates, organisations will find better and more diverse talent. Here’s why:

Open hiring produces better candidates

Cornell University’s JR Keller is an expert in talent acquisition and management. He studied 11,000 internal hires at a Fortune 100 firm and found clear evidence that open hiring processes are more effective. Keller looked at roles that were filled through a company-wide advert inviting anyone to apply, and compared them to hires selected by managers in a closed process.The "open hire" candidates outperformed the "closed hire" candidates, “on nearly every conceivable dimension of quality.” They were also 20% less likely to quit or be fired.

The implications of Keller’s study on board hiring are obvious. The more open your hiring process, the better the results. There are three main reasons for this.

1. A bigger candidate pool leads to better applicants. Competition is more intense and standards are raised – typically, the five tallest people in a city of one million people will be taller than the five tallest people in a city of 10,000 people. By choosing someone you know would do a good job, you may overlook someone you don’t know who’d do an exceptional job.

2. It focuses decision-makers’ minds on the relevant information. As Keller explains, “The mechanics of posting” – i.e. opening up a role to applications – “require a manager to create a formal job description, which in turn establishes a set of criteria against which to evaluate potential candidates.”

When someone is selected without a formal process, “managers informally mold the job requirements around their preferred candidate rather than evaluating the candidate against the requirements of the job.” The more formal, open process forces managers “to rely on objective information."

3. Objective criteria help boards avoid bias. By starting off with an idea of who they want, boards begin by ruling out people who don’t fit that picture. This restricted search process can lead to a very homogenous board, where groupthink rules. Research shows decision-making groups with diverse perspectives perform better.

Open hiring boosts diversity

Any organisation looking to improve the diversity of its board needs to embrace open hiring processes. In the 2020 update to his review into ethnic diversity on boards, Sir John Parker expressed his frustration at the slow rate of change he saw across the UK’s biggest companies. “To many, our continuing lack of ethnic diversity looks less like a failure on the part of minority communities to produce competent candidates, and far more like a choice on the part of business to settle for the familiar and traditional recruitment processes,” he wrote in the foreword.

Sir John was not alone – almost every review into board diversity has stressed the importance of opening up the hiring process:

• The 2018 UK Corporate Governance Code said that, “Appointments to the Board should be subject to a formal, rigorous and transparent procedure.”
• The Equality and Human Rights Commission Research report into Gender Diversity on Boards (2012) recommended that “Board openings need to be publicly advertised in order to increase the transparency of the appointment process.”
• The Parker Review included a Directors’ Resource Toolkit with a series of “Key Questions” that organisations should ask themselves to improve diversity and inclusivity. The first on the list was, “Are Board roles advertised in a way that are open, transparent and visible to all?”

Any organisation which is really serious about improving its diversity record needs to rethink its pipeline. How are you sourcing candidates? Where are you looking? How are you translating your nice-sounding policies into action?

Open hiring finds more committed candidates

Research by LinkedIn found that people actively looking for new opportunities are driven by different things compared to people who are approached about a role. The passive candidates tend to be motivated by money (mercenaries), while the active group wants to do better work and build their career (missionaries).

Open hiring sets a good precedent

There is an ethical dimension involved if you believe in the value of transparency. A good board is a beacon and should set an example. If everyone has earned their seat at the top table through an open and meritocratic hiring process, it helps establish this culture throughout the organisation.

Open hiring reduces bias

There are three main types of bias that can restrict the search for a new member:

Framing bias – Parameters are set, often arbitrarily, which immediately rule many people out. The board decides on the type of person they want and approaches people who fit that picture.

Confirmation bias – Goes hand-in-hand with framing bias. This means that when candidates are assessed, the validity of those initial parameters are re-enforced. Let’s say a search consultant has decided a board needs an ex-banking CEO. Their process doesn’t allow for the fundamental premise to be questioned. Rather it becomes, “Which of these ex-banking CEOs should we present to the client?”

Similar-to-me-bias – This might also be thought of as likeability, click, or fit. This happens when candidates are assessed more highly because they share characteristics with the hiring team. It can lead to excellent candidates being rejected – and average candidates being advanced – for very trivial reasons.

When boards hire through their networks, they risk falling foul of all of these biases. But according to the EHRC report, closed processes led by headhunters haven’t solved the problem either. In fact the opposite – “the “old boys network” is replaced by the”‘new boys network” which is run by executive search consultants,” it states.

Open hiring identifies more imaginative candidates

By acting as gatekeepers, search consultants have the power to define what a good candidate looks like. And the evidence shows this has been fixed in a very narrow way.

This gets compounded by the market forces of the headhunting industry. In his 2002 book Searching for a Corporate Saviour, Rakesh Khurana found that search consultants were under pressure to come up with “defensible” candidates. Rather than push the envelope and find fantastic people who could really transform an organisation, they wanted to present people whose presence on the shortlist they could easily explain. Safe and sellable wins the day.

In her 2010 study of a US search firm Who Gets Headhunted?, Monika Hamori drew similar conclusions. She found consultants focused more on a candidate’s job title than their achievements, and they also favoured people working at big, well-known organisations.

This produced competent but uncreative and risk-averse shortlists. Its consultants struggled to spot potential matches across different functions and roles, producing lists of people already doing the same sort of thing somewhere else.

Conversely, an open, candidate led-process drives people towards the role. This widens the talent pool considerably and identifies people with perfect skillsets who wouldn't otherwise have ever been considered.

Best practice for board hiring

So how should a board that’s invested in finding the strongest, most diverse candidates approach their next hire? Research points to the following steps:

1. Create a well-defined brief (in which the hiring organisation is challenged).

2. Open up the hiring process to bring in a broader range of talent.

3. Design an assessment process which includes a cognitive ability test, a work sample test and a structured interview.

4. Take references that don’t just rubber-stamp your decision.

You can read more about this process here.