It’s time to rethink the way we hire hourly wage workers
Dial Fellows
Posted July 2020
An innovative approach to hiring puts worker preferences first—and it’s making them more successful.
To pay her bills before and during college, Sara Nadel did what many students do: she worked an hourly wage job as a barista at a local cafe. She loved it. She loved meeting the regulars—specialists at the university blood lab, a janitor at a movie theater, a locally famous musician. She loved overhearing campus gossip. It was also a nice break from her academic research on the complex economies of developing countries.
Plus, she got really good at foaming milk.
Not all of her colleagues loved the job the way she did, though, and many left after a few days on the job. She didn’t always know why—maybe they couldn’t stand rude, early-morning customers, or they found it impossible to balance afternoon shifts with picking up their children from school. The turnover was expensive for the coffee shop too, with Nadel and others taking up extra shifts.
But those who quit were just as experienced and competent as Nadel. So why did they leave? What was the difference between a successful and an unsuccessful employee at the cafe?
A data scientist by training, Sara Nadel had a hunch she could use data to figure it out.
Today, as the U.S. grapples with the COVID-19 pandemic, it’s clear that the frontline, hourly wage workforce—which includes Nadel’s barista job and industries like fast food, catering, delivery, hospitality, contact centers, and warehouse fulfillment—is the backbone of our economy. Policymakers are rushing to support workers whose jobs have disappeared in the crisis, and businesses are responding with policies that recognize their importance with increased wages or paid sick leave.
But there is also an important, longer-term discussion to be had—about the stability of the hourly wage workforce, and what is needed for true job security even in the best of times.
In the United States, hourly wage jobs are characterized by near constant turnover: 53 million workers leave their jobs once per year, and 50% of workers leave within the first 30 to 90 days. This means that for the most economically vulnerable workers in the country—the 40% of the workforce earning $20 or less per hour, with median annual earnings of $18,000—it’s almost impossible to find financial stability and build a career.
High turnover is also bad for business. Human Resource departments face an endless cycle of recruiting, on-boarding, and training, which costs at least $180 billion every year. Most companies seem to think this turnover is just the cost of doing business. But what if it didn’t have to be?
Today, after years of field research (and foaming milk), Nadel believes we can account for one-third of this turnover by better understanding “job fit,” or individual preference for different types of work.
Nadel, an Emerson Collective Dial Fellow, believes that the way companies traditionally hire hourly workers is broken. Employers tend to use biased signals like education, work experience, “culture fit,” or even race or age, to make hiring decisions—signals that are useless at predicting performance.
What would finding the right match look like? While the nature of all hourly wage work might appear superficially similar, Nadel’s research shows otherwise.
Take her favorite fun fact: the type of person who thrives in a job at Burger King is not the same as the person who thrives at Dunkin’ Donuts. A great Burger King employee is an inveterate multitasker, Nadel says, working across multiple workstations and managing a long menu list. On the other hand, a great Dunkin’ Donuts employee has a natural attention to detail (they get the cream-and-sugar right) and is a people-person. After all, they’re dealing with people who haven’t had their morning coffee yet.
Nadel co-founded a company to help match applicants to the right jobs: StellarEmploy, which makes the first software tool for high-volume recruitment of hourly workers. Designed to measure an applicant’s preferences and place them in the right job, StellarEmploy aims to curb high turnover, saving businesses millions of dollars and protecting vulnerable workers from an endless cycle of applying for new jobs. By hiring based on job fit, Nadel has also shown that you can actually eliminate bias from hiring decisions too.
“Can we create a world where people stay in their jobs longer, are able to grow in those jobs, retrain, stick around, get promoted, and make more money—while employers also benefit?” Nadel wonders. “If you can just get that match right, you can create that world.”
Sara Nadel, Dial FellowCan we create a world where people stay in their jobs longer, are able to grow in those jobs, retrain, stick around, get promoted, and make more money—while employers also benefit?
Nadel’s journey from academia to entrepreneurship is a journey of discovering her own job fit.
In 2012, Nadel was living in Lima, Peru conducting research for her PhD in public policy. Interested in the macroeconomic cost of turnover, she was using statistical analysis and behavioral science to better understand how people in emerging markets found jobs.
She began by investigating how university students in Peru chose their major, and how different majors corresponded to professional opportunity. She found that students who had a family member in the formal labor force made more informed choices about their major than those who did not—with the implication that those who made more informed choices about their major also had more success in jobs after graduation.
This might seem obvious—that those with exposure to various job types are better at selecting one for themselves—but Nadel felt she was onto something. “That was the aha moment for me,” she remembers. “I realized that we could help people excel professionally by giving them valuable information about where they’re likely to excel, and helping them find their best job fit.”
Nadel theorized that job fit could actually be measured. She partnered with DoiT, a popular jewelry and accessory store in Peru, to test her hypothesis, developing an applicant survey for the store that tested for job fit. It worked. By hiring with Nadel’s survey, DoiT reduced turnover by 30%. Remarkably, its hiring got fairer, too. Using Nadel’s survey, DoiT hired 15 times as many single mothers, which had been its biggest point of bias in hiring.
Once Nadel had finished her dissertation, she knew she didn’t just have an academic paper. She had a business model. “I realized I was much more interested in solving problems in the real world than in academic journals,” she remembers. “I was surprised to wake up one day and realize that I was an entrepreneur.”
Nadel had found her own job fit. When she came back to the U.S., she co-founded StellarEmploy to help others find theirs, too.
How exactly does it work? StellarEmploy measures an applicant’s job fit with its Preference Survey, a 60-question survey that tests for the 12 traits that Nadel’s research shows are the building blocks of hourly work. The survey, which takes 10 to 15 minutes to complete, tests for skills, like analytical thinking and social comprehension; preferences, like for multitasking over focused work, or teamwork versus solo work; adaptability, which is how likely a candidate is to change who they are for a job; and motivation.
StellarEmploy calibrates its Preference Survey for each of its clients (hourly wage businesses) by asking the client’s current employees to fill out the Preference Survey so that it can map the traits of its most successful employees. But the survey is always evolving and getting smarter as StellarEmploy begins to place workers in jobs, and it is recalibrated over time.
Nadel gives an example from one of her clients. Some positions offered four, ten-hour shifts per week, and others, five, eight-hour shifts. StellarEmploy found that the applicants who favored work-life balance were more likely to thrive in the four, ten-hour shifts, reporting that it gave them an extra day at home with family.
Since launching in 2018, StellarEmploy has placed three thousand people in jobs. It has helped generate $9 million in income for workers, and has saved employers at least as much money. It has also improved early employee retention for its clients by 20%. As a result, Nadel estimates StellarEmploy has been able to relieve six hundred people from hitting the job market again, translating into about $3,000 in saved income for every 12-week unemployment search.
So far, StellarEmploy is beginning to prove what Nadel had first suspected at the cafe in college: that not all hourly wage work is the same, even though employers usually hire like it is. If businesses begin to understand that preferences, not resumes, are a better, fairer way to hire, they can set up their employees for success.
“I think that, as a society, we want everyone in our community to be happy, and stable, and a productive member of our community, and even to find joy in their work,” Nadel says. “We have a lot of luxury in the white-collar world to talk about that, but that stability should exist for someone who is a barista, too.”