[CAJobPortal Insights ] Type 1 versus Type 2 errors in recruitment

Imagine how the recruiter at Facebook who rejected Brian Acton, founder of Whatsapp, would have felt. This proved to be probably one of the most costly hiring errors ever. He was rejected a job at Facebook only to be later bought on board with the $19 billion acquisition

In statistics, a Type I error means rejecting the null hypothesis when it’s actually true, while a Type II error means failing to reject the null hypothesis when it’s actually false.

  • Type-1 errors, called “False Positives”, cause us to reject our hypothesis while the hypothesis is true in reality – say the person who, with the best of intentions, mistakenly shouts “Fire!” in a crowded theatre?
  • Type-2 errors, called “False Negatives”, cause us to accept our hypothesis while it may be false in reality. Say the person who does not shout fire when there is one.

Perhaps a well-intentioned “boy who cried wolf” even though there wasn’t one (Type I, false positive error) is a better boy than the one who was silent after thinking he spotted a wolf among the sheep (Type II, false negative).

In a typical recruitment scenario also, there can be two types of errors.

The organization may end up rejecting a ‘fit’ candidate or may end up accepting an ‘unfit’ candidate.

A Type 1 Error is when you recruit a person whose fitment has been called into question. This is an expensive situation, which may call for immediate remedial action. The cost of letting go of the wrong recruit, honorably; and the process of re-recruiting a better fit, entails cost, effort and time, and also leads to drop in employee morale.

A Type 2 Error explains the lost opportunity of missing out on a suitable candidate. This happens due to various reasons, including lack of information, an overcautious bearing (effort to reduce the Type 1 error.) This is expensive for two reasons: the loss of potential candidates in a resource constrained world; and worse, to lose him/her to a competitor.

So, an organisation might want to model its hiring practices such that  it does not end up offering a Chartered Accountant who is completely shaky in terms of article ship experience / conceptual knowledge. It is still ok to miss out on a Chartered Accountant who is All India Rank 1.

This also applies in B-schools as well where companies make a beeline for top talent. Type 1 errors must be avoided. Type 2 error is ok.

Simply put to avoid a bad hire and reduce the chances of missing a potential high performer who might get recruited by your competitor!

While there is never a perfect fit or never a zero-fit, the strategy must be oriented towards this only

So how can companies reduce Type 1 and Type 2 errors? What’s your strategy