What Actually Predicts Job Performance?

Our team has experience: we've built businesses, helped with fundraising; I, personally, have worked on turnaround management, and, generally, consulted many businesses across different industries. However, as food for thought if you are hiring people, the research has shown that, since at least 1986, experience isn't even a decent predictor of job (task or contextual) performance.

Schmidt & Hunter (1998) found a correlation of 0.18 between job performance and years of experience[1] and they cited another paper from 1986, that found a correlation of 0.00, where performance was measured by sample tests and supervisory ratings (N = 1,474)[2]. In the same research, they generally show job samples and general cognitive ability are the best predictors, along with some others that are more for formal job application processes like structured interviews. Still, the correlations sit only slightly above 0.5[1,2], which doesn't seem very promising.

This isn't a literature review on the topic, but you can also check out Wright (2023)[3]. Additionally, Richardson & Norgate (2015) cast doubt (but don't confirm) on the idea that IQ is the best predictor of job performance[4]. Another recent meta-analysis confirmed that prior experience isn't a good predictor, if any at all (r = 0.06; k = 43; n = 11,577)[5].

Anyways, I'm pretty sure this isn't a surprise to many people.

Although years of experience can impart job specific knowledge (which is an okay predictor), the two are clearly separable based on the research. This probably has at least something to do with experience, as per the general, overarching research in neuropsychology, being completely biased. In fact, I can't even write this article without exhibiting the bias of my own beliefs in at least some respects. The future often doesn't reflect the past- the landscape changes, and the only thing that will really guide you through that is a set of top-down thought processes (theory), whereas experience can guide you to making statistically insignificant (and potentially biased) conclusions.

For example, I'm a huge fan of the CFA curriculum (I'm not sponsored, by the way, and would be required to disclose if I was) and I hear all kinds of stuff about it based on people's experiences. 'It isn't relevant to [investment banking, FP&A, etc]' (despite the accounting standards for business combinations, financial statement analysis, etc). 'It doesn't really go deep on [unobservable variables, corporate finance, etc]' (interestingly, I don't agree with any of the 'gaps' I've been told about but there are gaps: Advanced Macroeconomics by Romer goes way deeper on the Solow Growth Model and really breaks down all the equilibrium relationships, for example). It seems pretty clear that many of these 'experiences' are actually driven by how a person has conceived the world, rather than how the world actually is.

In any case, I am also a big proponent of the idea that business professionals often don't read enough. Experience is biased because it is narrow. Studying with intent provides tools that carry over into functional processes. If I ignored the theory of science, and tried to recreate it from scratch through my own experience, you would (or should) consider me ridiculous.

And this does carry over into the way we do our work. For our onboarding processes, I basically just bring on smart people with skills and train them on domain specific knowledge for analysis. The data shows experience to be, effectively, an unrewarded factor; whereas skill, cognition, and job-knowledge appear to be separable and more relevant, so I want our company to invest in them.

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References

[1] Schmidt, F. L., & Hunter, J. E. (1998). The validity and utility of selection methods in personnel psychology: Practical and theoretical implications of 85 years of research findings. Psychological Bulletin, 124(2), 262–274. https://doi.org/10.1037/0033-2909.124.2.262 

[2] Schmidt, F. L., Hunter, J. E., & Outerbridge, A. N. (1986). Impact of job experience and ability on job knowledge, work sample performance, and supervisory ratings of job performance. Journal of Applied Psychology, 71(3), 432–439. https://doi.org/10.1037/0021-9010.71.3.432

[3] Wright, S. (2023). Personality as a predictor of job performance in an all‑remote workforce: A study of workers within the Canada Pension Centre for the federal public service (Unpublished doctoral dissertation). Carleton University, Ottawa, ON, Canada. https://carleton.scholaris.ca/server/api/core/bitstreams/640d59e9-2808-4eaf-81dd-8f090bec7383/content

[4] Richardson, K., & Norgate, S. H. (2015). Does IQ really predict job performance? Applied Developmental Science, 19(3), 153–169. https://doi.org/10.1080/10888691.2014.983635 

[5] Van Iddekinge, C. H., Arnold, J. D., Frieder, R. E., & Roth, P. L. (2018). It's required, but is it job-related? A meta-analysis of the validity of prior work experience. Academy of Management Proceedings, 2018(1), 10426. https://doi.org/10.5465/AMBPP.2018.278