All Commentary
Wednesday, May 1, 2002

Credentials: Because the Free Market Abhors a Vacuum

Credentialing Is a Win-Win Proposition

Many people gripe about credentialing. The requiring of a credential, it is said, shuts qualified people out of the labor market (much as my lack of demonstrated athletic prowess keeps me from getting that job as an NFL quarterback that I very much want!).

Before discussing why credentials have become such an important part of today’s employment market, let me admit my biases: I am the director of certification for the Polk County, Florida, chapter of the Institute of Management Accountants and the string of letters behind my name stands for Certified Management Accountant, Certified in Financial Management, and Certified Novell Administrator.

Back in the “good old days” (and as a relative youngster the good old days I’m speaking of weren’t so long ago), there were some assumptions one could make. Second-graders could read, because on the first day of first grade one began reading aloud by sounding out the letters and one certainly did not get promoted to second grade without demonstrated reading skills. One got all the self-esteem one needed after successfully sounding out “Midnight, the cat” in one’s reader. A high-school diploma meant that one could read, write an expository essay, do addition and multiplication, and show up for class on time. While IQ testing had been passé for decades, its closely correlated cousin—the SAT score—remained a much-quoted and asked-about number with powerful predictive abilities. A bachelor’s degree meant that one was skilled in the “liberal arts” and had been vested with—perhaps forgotten, but at least exposed to—the common body of knowledge possessed by “educated people.” And so forth. . . .

The good old days were replaced by the era of self-esteem (warranted or not). While caring teachers had always promoted self-esteem, now it was tied to effort rather than results. (Rather than feeling good about learning the multiplication tables, for example, it’s okay to feel good about trying to learn them irrespective of success.) Trying hard went from being a tool for doing well to being a substitute for doing well. “Social promotion”—the practice of promoting students to the next grade regardless of whether they had mastered the current grade level—meant that one could no longer assume that second-graders could read. A “high school equivalency” certificate became the de facto equivalent of a high school education. Allegations—and acceptance of these allegations at least among a preponderance of lay-people—of cultural bias in the SAT led to its diminished importance. Grade inflation—and a relaxation of standards at many institutions—meant that even a college degree was not in all instances a guarantee that its possessor was an educated person.

The free market, as we have seen time and time again, abhors a vacuum. Employers have to make decisions; they cannot hire everyone and see who works out best (nor can they afford repeatedly to hire the wrong candidate). They need to screen potential employees to select those who have the best chance at success. When their tools to do this degraded, they created their own. Among these was the requiring of credentials.

Credentials are, at their very core, the essence of the free market. The issuer of the credential sets—and publishes—the criteria for obtaining it. It is obviously in the best interest of the credentialing body to insure that its credential is widely respected as a predictor of success. Those obtaining a given credential, and those requiring it, can decide for themselves what value the credential has. The entire transaction is voluntary.

Fair to the Core

Credentials are also, at their very core, fair. Irrespective of one’s culture and demographics, either one has what it takes to earn a credential or one does not. Even fairer, one has the choice of whether to earn a credential or not. Fairer still, employers have the right to decide whether or not any specific credential has any value. They level the playing field by allowing one to demonstrate that—everything else aside—one possesses the knowledge (or other defined skills or background) required to obtain that certification.

Credentials have become popular—almost a de facto requirement for some positions—because they perform a valuable service: they objectively demonstrate that their holder possesses some quantifiable, objective skill, knowledge set, or other element. For example, I do not know—and it would be tough to discern in an interview and impossible to discern from a résumé—whether you took cost accounting, whether you had a good teacher, or whether the teacher covered the material. If, however, you show me your Certified Management Accountant certificate, I know that you—like everyone else with that certificate—have significant knowledge of cost accounting. Credentials are even more powerful when nontechnical managers need to hire technical staff. I am not technically qualified, for example, to quiz someone on his router knowledge. If, however, he has a Cisco certification, I know he has the technical skills required (without even knowing what these technical skills are, much less how to test for them).

Like most free-market solutions, credentialing is a win-win proposition. The potential employer wins because he can quickly discern a great deal about a candidate by his possession of a relevant credential. Conversely, the employee wins because he can definitively demonstrate a great deal about his skills and knowledge by earning the appropriate credential. Society wins too. Not just because the entire process is voluntary, but also because the efficiencies involved in hiring the right person as expediently as possible are built—albeit indirectly—into the prices of the goods we consume and the services we use.

Keith Wade, CMA, CFM, CNA is the vice president of administration and chief financial officer at Florida Cypress Gardens, an adjunct professor of business at Webster University, Lakeland, and a doctor of business administration student at Argosy University, Sarasota.