Recently, PSI had an opportunity to talk with Joseph Nowlin, President, Nowlin Associates, Inc.,
about the issues and challenges he faces as the premier HR consultant in the wood products
industry. An Industrial Psychologist with extensive experience in job analysis, validation, and
selection technologies, Joe has established winning HR solutions for major companies across the
United States. Some highlights of the interview follow. A complete transcript can be downloaded.
Interview with Joe Nowlin
President, Nowlin Associates, Inc.
Part I: The Nowlin Selection System
PSI: Since 1980, Joe Nowlin has been a leading HR consultant to the wood products industry. An
Industrial Psychologist with extensive experience in job analysis, validation, and selection
technologies, Joe has established winning HR solutions for major companies across the United
States.
Joe, can you give us an overview of the Nowlin consulting practice and the types of solutions that
you provide your clients?
Nowlin: The bulk of my business involves designing and implementing selection procedures.
These systems have been designed, installed, and fine-tuned in the manufacturing environment.
The first system, what we call "OPRS," is for operators and maintenance personnel - the people
that are closest to the work … those people who put their hands on the work. The second system,
called "SMTS", is for supervisors, managers, technical personnel, project engineers, human
resource managers, accounting managers, IT managers, etc. The third system, called "GACL," is
for general administrative and clerical personnel - secretaries, receptionists, data entry clerks,
accounting clerks, etc. The GACL jobs are very important jobs because they are gatekeepers; a
lot of information flows through them and they have to be pretty skilled at what they do. The most
heavily used of the Nowlin systems is OPRS - for identifying people off the street who have the
ability to learn the operations and maintenance jobs in manufacturing organizations.
PSI: Can you describe the employee selection procedures that you typically recommend for your
clients? How you go about deciding the elements and putting the process together?
Nowlin: It's an elegantly simple system, we believe. My basic philosophy is that performance is a
function of motivation and ability. That is a tenet of industrial psychology - that performance, or
human behavior, is a function of the ability to do what is required and the motivation for, or the
adaptation to, that kind of work. We identify ability requirements by doing some pretty extensive
job analysis - to determine what sort of abilities are required on the job. In manufacturing, for
example, a candidate must have some level of numerical ability and some level of verbal ability,
and some level of three-dimension ability, and some level of mechanical ability. These abilities
are more easily assessed with a paper and pencil test than they are in a face-to-face interview,
even with professional interviewers. It is more reliable and valid to assess these abilities with a
battery of tests, so tests are a staple in the Nowlin selection process. Now, the tests vary
according to the job - the operator's test battery is different from the supervisor's test battery.
Ability by itself is necessary, but it's not enough. We also assess what a lot of people call
motivation, what I happen to call adaptation. We get a history of the applicant's adaptation
experience in similar situations. It's what we call a R-A-I-S-E - a "reasonable adjustment in a
similar environment." And the way to determine whether they made a reasonable adjustment is to
set them up in an interview and pose a series of questions about situations that they've been in.
Now, it's important that you understand that we pose questions about situations that they have
been in; I don't pose questions about situations that you might encounter. These are all real life;
these are all historical… because the cornerstone of the interviewing process is that you behave
today a lot like you behaved yesterday, and you will behave tomorrow a lot like you behave today.
The cornerstone of the ability side - the testing side - is that abilities are established pretty early in
life and then are fairly resistant to change. So, rather than develop those kinds of abilities in a
mature adult, what we try to do is identify those people that already have them. Those are the two
basic components.
Now, there are some other important notions. Obviously, we work hard on forming the applicant
pool in the first place because that's very, very important. You can have a very good applicant
pool and stumble around in a selection procedure and still do OK, but the opposite is true, too that if you don't have a very good applicant pool, you may have the world's finest selection
procedure, but still not do very well.
PSI: In developing your structured interview process, you focus on historical information. Each
candidate has his own history. What type of training do you need to do this effectively?
Nowlin: The training that we give interviewers has been referred to as sort of a short course in
industrial psychology. We talk about applicant pool formation, testing, and interviewing; we talk
about the legal implications, etc. It has been described as intensive and extensive. It is intensive
in that we push people pretty hard in a two-day session. We train them in data-gathering
techniques. I have developed a number of lead interview questions, and I teach the technique of
asking questions, the technique of following-up, and the panel interview technique of allowing one
person to ask questions while the other three people simply listen to the questions or listen to
responses and make some notes.
PSI: How do you pose your interview questions?
Nowlin: The hardest habit for interviewers to break is to get them to ask historical questions,
rather than a hypothetical, future question. For example, a naïve interviewer may ask something
like this: "We have an opportunity for a lot of overtime here. Will you work overtime if you are
selected for this job?" And the answer to that question by a reasonably astute candidate is "Yes."
A more intelligent way of asking that question (more intelligent meaning that it's the way to get
better, more reliable, more valid information) is, "Tell me about the opportunities for overtime on
your last job, and how much of the overtime you worked." A naïve question is: "Attendance is
pretty important. Will you show up for work?" A more intelligent way of asking that is, "Tell me
about your attendance record on your last job." A naïve question is, "Will you take advantage of
tuition reimbursement?" and the answer of course is "yes." A more intelligent way to ask the
question is "In the past, when you had the opportunity for educational advancement or tuition
reimbursement, did you take advantage of it?" and specifically, "Can you give me an example?
What were the courses? How did you do?". It's a hard habit for people to break, but we seem to
be able to break those habits and ingrain a sort of a historical perspective pretty quickly in the
training.
PSI: Describe how the interview process is scored and then combined with the overall test.
Nowlin: The Nowlin interview consists of a panel of four people who ask historical questions,
gather data, and reach consensus on each of ten different dimensions. These dimensions are
combined into the OI, or overall interview score. We give all candidates a starting point: everyone
starts out as a "five" on a nine-point scale. Positive evidence moves them up on the scale;
negative evidence moves them down. Lack of evidence also moves them down, because they
haven't demonstrated appropriate behavior. We dial the interviewers in pretty fast. The interview
panel comes up with a single score between one and nine - a "nine" then being their evaluation,
from an adaptation standpoint, that this candidate has a high probability of being successful. If
they end up with a "five," the candidate, we predict, would be a fifty-fifty chance of being
successful, and a "one" would be a low chance of being successful.
PSI: How do you combine the ability test scores with the results of your interview process?
Nowlin: The interview is done blind to test scores for obvious reasons. We wouldn't want the
interviewers knowing the test scores at all. And in the Nowlin system, everybody who gets tested
also gets interviewed. You know, if the interviewers know the test scores, high scores are going to
bias them and low scores are going to bias them. Perhaps even average test scores bias the
interview. And we're measuring two different things … ability and adaptation. In this selection
algorithm, what we try to do is keep those data points as independent as possible.
Once the interview is scored, the interview board reveals to itself the test scores, which are also
presented on a one to nine scale - nine being the most highly likely on the basis of abilities to
learn and be able to perform the job, five being a fifty-fifty, and a one being a low probability of
being successful.
PSI: Joe, what are the components of the test program?
Nowlin: There are five ability tests for the operators - mechanical ability, numerical ability, space
visualization, perceptual speed, and verbal ability. Once you get to the end of the interview and
reach consensus, you reveal test scores, and the numbers are put together in a prescribed way.
The tests get 55% weight and the interview gets 45% weight. That number is called the final
prediction. The final prediction is a number that represents the candidate's likelihood of being
successful - a combination of abilities and adaptation in similar environments.
PSI: Why did you weight the tests 55%?
Nowlin: Because the empirical evidence shows that tests, by themselves for these kinds of jobs,
are better predictors of success than the interview is by itself. And in fact, the empirical evidence
is that the tests are about half again as powerful by themselves as the interview is by itself. But
when they are combined they give you a very powerful scheme. We need the ability to do the job
plus the motivation to do that kind of job. What we need is both pieces.
Interview with Joe Nowlin
President, Nowlin Associates, Inc.
Part II: The Impact of a Quality Selection System
PSI: What is the value of improved employee selection?
Nowlin: Marshall Hahn , the retired CEO of Georgia Pacific, recognized the value of employee
selection and stated it as a 3 million dollar investment. He was speaking to the American Paper
Institute and told the audience that the selection of one person into an operator's job in one of his
facilities was basically a three million dollar decision. Now that raised some eyebrows in this
crowd made up of primarily human resource people, but he explained that when you take into
consideration the average age of people being selected (and for Nowlin clients, it's about 27),
annual wages and fringe benefits (around $50,000), and the fact that that 27 year old could spend
the next 35 years working for the company, you would be talking about a 1.7 million dollar
investment, not considering the training, COLAS's, etc. And he recognized that companies spend
a lot less time and have fewer levels of review when making an employment decision than we do
when we spend 3 million dollars on a piece of capital equipment.
PSI: How does a valid selection procedure impact the bottom line?
Nowlin: When you talk about the impact of the selection procedure, you need to consider both
the validity of the procedure and the selection ratio … the number of candidates considered for
each one you hire. If you have a test battery that has validity of .50, that does not mean that it's
right 50% of the time. The .50 is a validity coefficient. The validity coefficient translates into a hit
rate depending on the selection ratio. You need both the validity and the selection ratio to
determine how effective a system will be. If you had a system that had validity of .60, and had a
five to one selection ratio, basically you end up with 90% of the people being average to above
average performers and missing on 10% of the people … selecting below average performers.
PSI: What about the selection ratio, or the number of applicants you evaluate for each opening?
Nowlin: Once you have a valid selection procedure, you have to use it. You have to evaluate
more than one person for every opening. If you had a system that had zero validity, it really
doesn't matter how many people you looked at, you'd still only bat 50%. You could look at one
applicant and hire him/her, and the odds of success are be fifty-fifty. You could look at 100 and
select 10 of them, and you'd still only be right half the time. So you need both - a valid system
plus a reasonably large selection ratio. I ask my clients, "Do you think you can live with a 10%
error rate? Now, you'll tell me if you can't, but I think that if you hire 10 people, I believe that you
could live with one being a below average performer." But in a random system, if a company
selected 10 people, they would have to live with five who were below average. And people say,
"now wait a minute - if we select a 10 person crew, we can't get along with five of them who are
below average performers." Now, can they get along with a 10-person crew with nine who are
pretty good? The answer is yes, probably. How about eight? Welllll, - it gets tougher. How about
seven? Well, it gets even tougher. That's how important the selection ratio is, but only when used
with a valid system.
PSI: That is a great description - it really brings it home.
Nowlin: An organization puts tests in its selection process. They institute structured board
interviews. The organization attempts to build up the validity of the selection process and then
they quit working on trying to increase the validity. They don't want to administer more tests
because, at some point in time, they know they are working on a margin. There's probably a limit
to how valid a test battery can be, and there's certainly a limit to how valid an interview can be.
But if you put them together… We select the best tests we can find. We have an interview that is
a very reliable and valid predictor of job success. Now, if you want to improve your batting
average, the alternative is simple … just look at more people. And, of course, the client says, "We
came to you because we want to look at fewer people." And I say, "I know, but you now have a
valid selection procedure, and, it's in your hands. The more people you look at with this
procedure, the higher the payoff. Theoretically, you could have two facilities … two facilities with
the same quality of applicant pool, with the same test and the same interview procedure, and
equally trained people doing the interview. But if one facility looked at 10 people and selected one
person while the other looked at only five and selected one, the former would have a higher
batting average over the long-run. It's ironic, but that's the way these systems work.
PSI: Yes. They have to work harder.
Nowlin: That's exactly right. But in this case, you are working harder with a good tool. If you have
zero validity, it doesn't really matter how many people you look at. That's a difficult concept to
understand, but once you understand it, it makes perfect sense.
Interview with Joe Nowlin
President, Nowlin Associates, Inc.
Part III: Turnover, Training, and Other Challenges
PSI: I would imagine that operators and maintenance personnel require extensive training - you
don't just find someone off the street that has that kind of specialized knowledge, do you?
Nowlin: My clients invest a lot of organizational resources on training. And the same amount of
resources goes further when you have more highly able people. People that have a real
foundation, a steep learning curve for learning the kinds of things that are going to be taught…
And also, my clients have found that activities - like on the job training - seem to go a little further
because people pick it up a lot faster. I don't think that my clients are spending less money on
training, but I think that they find that the training dollars go a lot further in terms of the kinds of
things they throw at people who are highly able and highly motivated for this kind of work.
PSI: Your clients are able to bring new employees up to speed quicker and get them further along
faster?
Nowlin: That's right, and that is particularly important in today's organizations where we are
getting leaner and leaner for a number of reasons. One is that the labor cost for my clients is
typically about a third of the total cost of the product. Labor costs are pretty high, so if we can get
the same amount of work done with fewer people, we do. That's also driven heavily by the
nationwide era of low unemployment. I mean, there are just not enough bodies to go around. So
most of my clients are finding that it is difficult to attract applicants, and getting more and more so.
Just because of the demographics there's simply not enough people to go around for these jobs.
The notion of cost driving the workforce smaller and smaller and the notion of not enough people
out there - the shrinking applicant pool - drives that number smaller and smaller too. It's really,
really important to have people that are, again, highly able and highly motivated to do this kind of
work.
PSI: What about turnover within your industry?
Nowlin: Well, it's an interesting concept - turnover for an industrial psychologist - there's no
optimum turnover. Well, there is an optimum level of turnover and I'll tell you what that is in a
minute, but a lot of people believe that zero turnover is optimum and that's sort of what they shoot
for, but if you look at it critically, zero turnover is only optimum if you make perfect selections in
the first place. If you make selections that are not so good, you want higher turnover, provided, of
course, that your low performers are the people who turnover. In the real world, that's typically not
what happens. In fact, if the organization is very effective in doing what it sets out to do, good
people will get selected. I don't mean good in terms of their character traits, I mean people that
will match up the jobs pretty well. If those people leaving in droves, it indicates that the
organization needs to examine its practices.
PSI: You need to do some work internally within the organization to make it attractive…
Nowlin: Yes, I remember getting a call from an outfit in the southeast, and they said, "Our
turnover's 30% and we want your selection procedure to help us out here," and I said, "Before we
jump into this with the selection procedure, what's your starting wage?" And they said, "Well, five
dollars an hour," and I said (sort of half with my tongue in my cheek), "Well, when it gets to ten
dollars or twelve dollars an hour, then call me, 'cause there's not much I'm going to be able to do
with a selection procedure if the wages are that low - you're just simply not going to be able to
attract an applicant pool that will make any kind of a selection procedure worth running."
PSI: How has your selection process impacted turnover?
Nowlin: What happened in the industry that I serve - primarily the wood products industry - is that
historically, there has been very low turnover. The factors that attract people to this industry - high
rates of pay; very, very good fringe benefits; the basic ultimate lifetime job security - all those
factors drove people to join these organizations and stay with them for long periods of time. So,
for most of my clients, turnover has gone up a little bit, but that has not dissuaded my clients from
using the selection procedure. They say, "We know it's not a perfect selection procedure. There's
none out there that we know of that is." But we expect turnover to go up a little bit on - hopefully the hiring mistakes we make, those will be the people that turn over. The answer to the question
is: if turnover goes up a little bit, and I think with any rigorous selection procedure it will in the
beginning, for the kinds of organizations that have these very, very strong factors for attraction…
are the strong performers staying with the organization.
Obviously, turnover is one of the criteria that we look at, one of the problems that we try to solve,
and if an organization has extremely high turnover, there may not be any selection procedure that
helps out with that. Not until wages and fringe benefits get to be in an equitable position with
everybody else who is bidding for that same labor unit.
PSI: What are some of the other challenges that your clients face in developing selection
programs and attracting a skilled workforce?
Nowlin: I think there are two or three. Number one is this shrinking labor pool. That's really a
challenge. I get calls and e-mails regularly asking, "We know we need to be proactive in forming
the applicant pool; what kinds of things can we do?" So we have changed the structure of
advertising - with newspapers, radio, and TV - we're going to two-year and four-year schools, and
we're going to job fairs and going to high schools and talking about all kinds of jobs. So one of the
challenges is changing the philosophy that it is a buyer's market for labor units to one more of the
seller's market for labor units.
You see, if you really believe that it is a buyer's market for labor units, one is likely to say, "Hey,
everybody wants to go to work here," that kind of leads you to the erroneous conclusion that
because everybody wants to work here, we can have our pick of who we want and that sort of
takes the pressure off a rigorous selection procedure. And naturally, people say, "We can get lots
and lots of applicants - selection is not really an issue here." But I've told my clients that just
because you're the premiere employer in an area doesn't mean that you can attract the best
applicants; it means you can attract a lot of them. Obviously, the more you can attract, the more
likely they are to be normally distributed. And then if you add in a sound selection procedure, then
you can identify and select the applicants who are most able and most highly motivated. So, that's
one of the biggest challenges.
The other challenge is the tremendous advances in technology and manufacturing technologies.
It's just incredible. I've been fortunate enough to have been working in this industry for over 25
years, and I remember some of the installations that I went into early in my career that were 90%
hydraulic and pneumatic and 10% electronic, and in the time that I've been working with that
same facility, they've done a complete turnaround. The process controls are now probably 90%
electronic and maybe 10% hydraulic and pneumatic.
The technology of how to handle the manufacturing process has just changed drastically. Not
simply the information technology out there, I mean, it's the manufacturing technology as well. So
it is a challenge to find out who, in the existing workforce, has the ability to learn these kinds of
jobs, and also, at the same time, trying to identify people coming into the workforce who meet up
with this rapidly increasing technology and manufacturing process.
PSI: There is a lot of learning that goes on throughout the employee's lifetime. Do you feel that
this change in the manufacturing climate has increased the need for assessment upfront?
Nowlin: That's certainly one of the factors, and that's one of the factors that my clients talk about.
You know, they say they're not that favorably disposed to the educational treatments that people
are getting; it seems like people were coming to us without the math skills, the science skills, and
other basic skills. They say, "Look, we're on a collision course, the educational system appears to
be, if not falling, it's certainly not gaining very much across the board. Yet the complexity of our
jobs goes up and we have fewer people to do these jobs.
I remember an installation I was on in 1985, which, at that time, was a very, very progressive
change in this organization and the largest capital investment ever made by a private organization
in the state of Virginia - it was a very, very expensive expansion of a manufacturing facility. And at
one time, you would probably have maybe 35 people on a crew who ran this machine - it's a big
paper machine. As they designed the job, they said, "We think with the right people, we can run
this with 17 people." So the complexity of the job… I mean there were 1500 analogs - this is 1985,
this is 15 years ago - there were 1500 analogs on this machine. Which means that you could turn
switches off and on, you could open valves, you could adjust things, simply with the faceplate on
a computer screen rather than going out to a machine and manually throwing a switch. So it's
very, very complex, they're doing it with fewer people, and we're fighting this notion in some
peoples' minds - including mine - that, the educational achievement, again, if not falling is
certainly not getting a lot better. We're not putting people in the workforce that have the kind of
foundation to learn these kinds of jobs. So, in answer to your question, the technology, again, is
one of the factors that is very important.
PSI: Can you give me some examples of situations where you helped your client with this
problem?
Nowlin: Recently, we rigorously selected a crew of 44 people to go to work on a new piece of
equipment and cut start-up costs by 40%.
PSI: Wow.
Nowlin: And that was testified to by engineers who said this is the expected start-up cost, and
here are our actual startup costs
Paper mill start-ups provide an opportunity to lower the startup cost, by selecting people that can
learn the job very quickly and seem to be able to make the organization profitable over a period of
time. Three years ago, we did a reselection of a mill that was down - I mean it was actually
mothballed - and we went to reselection and the applicants for reselection - everybody who
worked there at the time of the closure - were invited to reapply. We went through reselection and
the new organization is outputting more with fewer people. The combination of a few factors
resulted in productivity up somewhere around 40%. It's amazing. It's just absolutely amazing.
Now there's an awful lot of work that goes on, and I know one of your questions is going to be,
what kind of involvement is there? There's an awful lot of work that goes on in making these
selections, but most of my clients feel like it's worth it after they've been with it for a while.
PSI: I would say so, 40% improvement in productivity is a huge number - that would be dramatic.
Nowlin: I'm sure during this process three years ago there was quite a bit of grumbling going on
about all the work that we had to do to improve employee selection process. And, you know,
within a year afterwards, they said OK, we're seeing the light now, we'd like to do this again at
another facility.
PSI: Yeah, that's the proof of the pudding, isn't it?
Nowlin: It is to me. I mean, I've been around long enough and have had people say to me that
the Nowlin process is a great idea. I like to hear those kinds of favorable comments. In the short
run, you can get sort of a Hawthorn effect. People will get fired up about it, a systematic way to do
things, and there's the science behind it, etc., etc. Maybe you can see a bit of a morale
improvement and maybe some real improvement, but the proof of the pudding is down the line
someplace: do people stay there, do they move to more complex and responsible jobs, more
quickly, etc.
The selection and development of our people is extremely important. If we were going to spend
1.75 billion on a piece of equipment just as you said. We would have levels of review and all kinds
of comparisons. Yet many people make employee selection decisions with a 30-minute interview,
a reference check or something else that has a fairly low validity… They look at a
recommendation from a friend… I'm not saying those things are completely useless, but they
don't have nearly as much validity as ability tests and a structured interview, and that's what we
do.
PSI: Looking at your list of clients, it's certainly like the who's who of the wood products industry…
Nowlin: I've been very fortunate… It really has been a great ride… I don't advertise extensively,
most of the jobs I get are word of mouth… That's the way I would like to be remembered in my
career - that my clients stick with me for a long period of time.
PSI: That's certainly a great endorsement.