Coding Challenges Are an Expensive Hiring Practice

Thursday, February 26, 2015

I saw an interesting conversation on Hacker News yesterday. A software developer complained about the hurdles that some companies require him to jump before being granted so much as a phone screen. Like most interactions, this one should be understood through the lens of pricing to see if businesses are making the right decision.

Companies that behave in this way have a very specific goal. They are attempting to reduce the expenses that they incur in hiring. Simply asking candidates for resumes results in a large number of applications that require many hours for hiring managers to evaluate properly.

In essence, businesses are doing their best to shift the cost of employee acquisition from themselves to the candidates applying for jobs. After all, candidates are not (yet) employees, so their labor is free. If there is no cost for their labor, why not ask them to toil away on complex technical tests?

Well, there are three reasons why this strategy will backfire for the corporations that employ it:

• First, there is little reason to believe that submitted assignments will be the sole work of the candidates. As the assignments are not being completed in controlled conditions, weak applicants may feel pressure to cheat - either by asking for help or by simply farming out the assignment on line. Having spoken to many computer science majors, it appears that many would-be programmers have few qualms about cheating in order to get an edge on the competition.
• Second, excellent software engineers are in high demand. High barriers to entry will cause those with the most options to simply apply elsewhere. This will ironically lengthen the time between initial advertisement and the hiring of a suitable individual, costing the firm significant opportunity costs as well as increasing the odds of an inferior hire.
• Third, it creates an environment of suspicion. Even if these assignments are above board, they have the potential to taint the reputations of the firms that use them. Some ethically-challenged companies have used these types of "coding challenges" as a means of acquiring free labor to complete real world tasks. As such, many software engineers assume that any companies requesting complex code may be submitting assignments in bad faith.

Companies should not attempt to offload their hiring costs onto employees - it's a system that benefits neither the companies nor the qualified candidates whom they most desire. I'm constantly amazed by low budgets that companies assign to hiring efforts. In this, the knowledge economy, profits are increasingly reliant upon firms investing their dollars not in advanced machinery nor state-of-the-art buildings, but from the hiring of excellent staff. Why would managers look to talent acquisition as an area for budgetary cuts? Short-sightedness and misplaced pressure from above.

Of course if a firm can't afford the money to employ proper hiring procedures, it might need a copy of my excellent book on software pricing and my associated consulting expertise. An understanding of pricing is a precursor to profitability that can be reinvested in proper hiring practices.