Improv at the Interview

New techniques show bosses how applicants react to stress

Remember the days when companies such as Microsoft (MSFT ) and McKinsey reveled in subjecting job candidates to mind-crunching strategy sessions? If you thought that was rough, imagine an interview in which no amount of research or grilling of insiders will help. Imagine instead that all you can do is knock back a healthy breakfast, pick out your nicest suit, and hope for the best. In the new interview, they're not just testing what you know. They're also testing who you are.

It's called the situational interview, and it's quickly becoming a must in the job-seeking world. In the post-Enron culture of caution, corporations are heeding an obvious insight: that a gold-plated résumé and winning personality are about as accurate in determining job performance as Wall Street analysts are in picking stocks. Now, with shareholder scrutiny, hiring slowdowns, and expense-slashing, no manager can afford to hire the wrong person. Companies ranging from J.P. Morgan Chase (JPM ) to General Electric Co. (GE )--and hundreds more--are switching to the new methods. And no wonder. Whereas the conventional interview has been found to be only 7% accurate in predicting job performance, situational interviews deliver a rating of 54%--the most of any interviewing tool (table).

The situational technique's superiority stems from its ability to trip up even the savviest of interviewees. Of course, every applicant must display a healthy dose of occupational knowhow, but behavior and ethical backbone play a big role--and that can't be easily gamed in this drama-class-meets-the-office scenario. For example, a prospective analyst at a Wall Street bank might have to face, say, a customer with an account discrepancy. It's not happening on paper, but in real time--with managers and experts watching nearby. The interviewer, or an outside human-resource company's trained assessor, plays the role of an irate customer on the phone, angry about money lost when a trade wasn't executed on time. It's set up as an obvious mistake on the banker's part.

Interviewers watch the candidates' reactions: how they process the complex account information, their ability to talk the client down, what their body language displays about their own shortcomings, and which words they choose. "These are very vivid recreations. There's no time to put on an act," says Ron Garonzik, who heads the assessment-services practice at human-resources consultant Hay Group. In this instance, not being honest about the mistake or evincing anger or frustration--no matter how glowing your résumé--means you're out.

Behavioral interviews are also being rounded out by other tools that, until recently, had been reserved for elite hires. Personality-testing outfit Caliper, for example, which probes candidates for emotional-intelligence skills and job aptitude, has seen its business jump 20% this year, according to President and CEO Herb Greenberg. FedEx (FDX ), Wal-Mart (WMT ), and BASF (BF ) all started using personality testing for applicants up and down the ladder in the past year, says Greenberg.

It isn't cheap: A simple two-hour Caliper test with analysis costs $245. An outsourced situational interview runs upwards of $500 a pop. Background checks, which have increased dramatically in the past year, are also a crucial element in screening candidates. Using all of them adds hundreds of dollars to the cost of hiring--but can save millions by avoiding the wrong choice.

Clearly, the new interview isn't without its drawbacks. Companies run the risk of antagonizing candidates, who may feel as if some line has been crossed into personal territory. Moreover, some companies worry about the fairness of personality tests. "You've got to make sure there are no inherent gender or racial biases in the test," says a development executive at a large New York investment bank that recently amped up its use of role-playing.

Paltry raises. Vanishing bonuses. Ballooning health-care costs. Add now another thing for job-shoppers to worry about--their unscripted selves.

By Jennifer Merritt in New York

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