Can You Depend on Solid ROI for Expensive Elite University Hires?

If you were hiring for an entry-level position, how much more would you pay for someone who had graduated from Harvard? How about Cornell? Would you be willing to pay as much for that candidate as the one from Harvard for the same job?

These are useful questions to ask yourself if your recruiters and execs are fond of hiring from the top universities in the country. Though a more important question is, "Do you get your return on investment for these hires?" Or, "Are you overpaying them for their full tenure with your company -- and spending more than necessary?" Employment discussions involve Compensation, front and center, so insights into the impact and cost of these employment decisions would be worthwhile.

Is there predictive data that can guide us? If the most recent research published in Harvard Business Review (HBR) is any indication, the answer continues to be not so much. This report talks about "nominal" differences in groups, but that word just helps them communicate what they've found and sidesteps the fact that the data may not be either robust or predictive. Nonetheless, the data does suggest a few valuable analytic opportunities if you read between the lines.

1. What do you want the candidate to do? Sounds like the perfect no-brainer, but there are opinion leaders who believe that college performance doesn't translate to company performance. One thing the HBR data points out is that there IS a performance difference in the following new hire competencies, with the elite university grads coming out on top: Knowledge in field; technical and business writing; team leadership and coordination. So if the position that you are sourcing prioritizes any or all of these, an investment in an elite university hire should pay off. On the other hand, what if you're hiring for an entry-level position with a tall career ladder over it? You may be in danger of overpaying if you consistently seek out elite university hires and pay them a premium.
2. Who are you hiring? It's likely, given the small number of new graduates from elite schools, that you will hire an "average" student from a top school. Will her/his performance be better than a top student from an "average" school? Face it, you risk missing out on real talent (at a lower salary) if you keep your recruiting pools too restricted. While bleeding-edge technical knowledge may be critical to some organizations, knowledge and skills customized to the company -- and thus, only learned on the job -- are becoming more and more important to companies that differentiate on product knowledge and/or customer service.
3. How good are you at this? Does your company have a reliable career development infrastructure? Do you use career levels to price jobs? If the answers are no, there will be few ways to rebalance total compensation as employees move up in the organization. If you are under pressure to over pay, study your practices to see if they hold up. Did those highly paid recruits of the past reliably provide exceptional performance? How did their performance trend over time? Most importantly, how does the trend line compare with other new hires in comparable positions? These metrics will provide useful insights into your practices, as well as discussion points when the time comes for the next expensive hire.

Margaret O'Hanlon, CCP brings deep expertise to discussions on employee pay, performance management, career development and communications at the Café. Her firm, re:Think Consulting, provides market pay information and designs base salary structures, incentive plans, career paths and their implementation plans. Earlier, she was a Principal at Willis Towers Watson. A former Board member for the Bay Area Compensation Association (BACA), Margaret coauthored the popular eBook, Everything You Do (in Compensation) Is Communications, a toolkit that all practitioners can find at https://gumroad.com/l/everythingiscommunication.