Getting ROI from DEI Hiring Requires Enhanced Signal Detection
In hiring, signal detection makes an enormous difference between wasting lots of money and time or getting incredible results. ©2023 Aaron McManus

Getting ROI from DEI Hiring Requires Enhanced Signal Detection

Many leaders know that there’s huge value in diversity and inclusion. Some studies have shown 2.5x higher revenue, while other studies have shown massive increases in innovation, engagement, morale, and performance.

Even though leaders understand the value that’s possible, capturing that value across an organization is a greater challenge. 

One key piece of the puzzle is hiring. It’s the only route to increasing diversity, yet it’s often disconnected from the strategic task of delivering ROI. 

Delivering hiring ROI is a core function of talent acquisition, and is increasingly becoming a focus for many organizations. There’s a dramatic difference between high performers and average performers, and that difference is even greater with increased role complexity.


McKinsey’s global “War on Talent” Survey data illustrates the gap between average and top performers, and how that productivity gap is increasingly dramatic as the complexity of the role increases.


Many organizations are looking to hire top performers who can generate >8x more results than their peers, but very few have implemented a successful approach to identifying and validating the hiring signals that accurately predict top performance within their organization. 

Conventional hiring wisdom is that hiring top performers from top organizations will lead to success. In reality, not all success is transferable. For example, the people who thrive at very large companies with substantial resources and clearly defined structures may not succeed in a smaller organization where resourcefulness and adaptability is key.

It’s also very common for hiring managers to move from one firm to another and be unpleasantly surprised that the same strategies that led to hiring success don’t transfer either. They may hire people who are highly skilled and qualified, but who turn out to be a poor fit for the needs of the role. Even quality people can be bad hires when the signals are not aligned.

SHRM estimates that the cost of a bad hire is an average of 30% of annual compensation for the role (and can easily reach six figures), while CareerBuilder’s data shows an average cost of $18,700. 

The cost of bad hiring is often buried and only clarified through an analysis of expenses including:

  • Recruitment advertising fees and staff time,
  • Relocation and training fees for replacement hires,
  • Negative impact on team performance,
  • Disruption and delay to incomplete projects,
  • Lost customers/revenue,
  • Outplacement services, 
  • Damaged employer brand/reputation, and
  • Litigation fees.

When combined with the challenges of increasing diversity within historically non-diverse industries, the ROI of hiring with misaligned signals can drop dramatically and become a huge expense. 

In some cases, companies can even make this worse by not accurately representing the challenges involved with the role or within the politics of the organization. Great candidates will often stick around just long enough to find a new role at another company. Most of the time, we can’t generate any positive ROI from a hire within the first few months. When first-year turnover is high, a systematic evaluation is extremely helpful in identifying the root causes of the issues.

First year turnover issues always go deeper than bias, which just skims the surface of how we approach hiring on an organizational level. 

Diversity hiring is approached from the lens of bias reduction. Even when well-intentioned, this can backfire. Harvard Business Review explored this well in “Why Diversity Programs Fail”, showing how focusing only on the risks, threats, and liabilities involved can lead to a reduction in diversity, instead of gains.

There is a better approach. 

Approaching the situation from the perspectives of change management, organizational maturity, signal detection, and data-driven decision making allows us to be strategic about the ways that we approach these sensitive and nuanced topics. 

As we move forward through the stages of hiring maturity, we increasingly gain higher ROI from each hire. When we stay stuck in a stage without maturing, we're often bleeding out a lot of hidden costs.

For many years, I’ve been fascinated by the science of predictive performance hiring. At its core, hiring is all about sending, receiving, and interpreting signals. Understanding a better approach to diversity hiring can be as simple as collecting the right signals. The right signals aren’t skin deep; great hiring is not predicted by skin, race, gender, age, or any other external factors. 

Over the past 2 decades of hiring, I’ve evolved a performance-centered approach to clarifying the most important signals through the noise - and how to modify them for every role, team, and organization. 

It’s not a “top-down” training approach, because that quickly tends to replicate the ways that diversity programs backfire.  By taking a collaborative mini-workshop approach with hiring teams, leadership, HR, and marketing, we can focus on the language used across the hiring, intervieing, and employment branding for sending and receiving hiring signals in order to get the best results from individual hires. 

Each hire becomes an individual data-gathering experiment, just like a marketing campaign. Our scorecards, calibration process, performance data, pipeline conversion rates, and many other data points all become increasingly useful as we move through an organizational process of improving the reliability and validity of our collective hiring data. The bigger picture starts to become much more clear as we gather increasingly relevant and useful data about who truly succeeds within each team as a part of our organization’s unique ecosystem. 

When we measure the gains that result from this approach, the ROI becomes pretty extraordinary. 

If you’d like a to quickly assess your organization’s current hiring ROI, I’ve built an ROI calculator that I’m happy to share with you (just send me a message or grab a time with me).

In one analysis of a 1,000 person company with 45% first-year turnover, we found that a 10% reduction in first-year turnover rates was worth nearly $3 million in savings. That’s just in the costs, and does not include the gains that are possible by making great hires in the most complex roles within the organization. 


A lot of organizations are increasing their focus on using AI in hiring - without realizing how essential it is to have accurate and validated signal detection first. When AI is trained on the wrong set of data, it can’t produce effective results. 

A lot of this might sound complicated, but the good news is that implementing this approach saves a ton of time. We typically see major reductions in time to fill and the amount of stress that teams are under by keeping critical roles unfilled. It’s even more exciting to hear hiring managers and leaders bragging to each other that they’ve never seen such awesome candidates for their roles. 

Reducing first-year turnover rates is a great way to eliminate all the unneeded work of replacing a person - because it ceases to be an issue. This frees up teams in so many ways to focus on the actual work of moving the organization forward in powerful ways. Plus, it’s a huge boost to morale and team performance. 

As we move through the stages of organizational hiring maturity, we start to see so many tremendous gains and benefits that show up in unexpected ways - creativity, innovation, and engagement start to soar.

If you’re looking to make a big difference in your organization’s competitive hiring advantages (with immediate positive impact on your most difficult/complex hires) - please get in touch right away.

David Falato

Empowering brands to reach their full potential

1mo

Aaron, thanks for sharing! How are you?

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Shay Leonia

Strategic Communications & Content Strategist | Building Engaged Digital Communities

1y

Such incredible info here, thank you for sharing this insight!

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