Since you think about hiring a lot, I'm curious: do you think the above is accurate? If no, how would you phrase it differently? If yes, how would you recommend testing that hypothesis instead?
In addition to the argument that the economics of temp- to- perm don't work out in this market for tech talent, there are also fundamental problems with the approach.
Most importantly: lots of people can perform well for short periods of time, especially if they don't have to deal with interpersonal conflicts (which take time to develop) or technical design disagreements (which only happen at inflection points in product/service design; ie, it might take 8 months to discover whether someone can "disagree and commit" to work on a team where they disapprove of some technical decision). Also, lots of people can work well on a project for a couple weeks before they get bored, and some of those people lack the ability to kickstart their engagement back up again once they feel "burned out" by a problem domain.
I think those are some of the most likely failure modes of new employees, and they also happen to be different from the failure modes that classic interviewing and work-sample testing are likely to suss out; ie, you can cover the non-psychological non-work-ethic concerns about new candidates with a relatively straightforward hiring process, so temp- to- perm might not even buy you much even if you don't assume that the approach is costing you the best candidates.
The problem is that companies looking to fill full-time slots are looking to fill full-time slots, not to engage a succession of contractors.
By requiring candidates to perform in a contractor role prior to signing on full-time, companies are effectively disqualifying most candidates that are currently employed. That's because very few people sniffing around for a better job than the one they have now can afford to drop out of the market for months or even weeks delivering work as a contractor. That's not how most people switch jobs; instead, most people search for their new job from the comfort and security of their current job, knowing that if (say) interviews don't work out, they can take their time looking for the next lead, knowing that they can continue to execute on their current job.
This is a problem for employers because virtually everybody you'd want to hire in this market is already employed.
Typically they offer to take a slightly-low full-time weekly salary+benefits number, divide it by 40, and pay that as an hourly rate. Oh, goody.
No company wants to pay a contractor the going rate for contractors, and then face the unenviable task of talking that contractor's rate back down again when making them a full-time offer. Nor do they want the bother of haggling over the details of a contract deal that will almost always prove, one way or the other, to have been a wasted opportunity. (If the worker proves to be competent, the contract will be replaced by a full-time offer as quickly as possible. If the worker is incompetent, the contract will be terminated at the earliest practical date. In no case does anyone care much about the contract. It is a consolation prize for everyone involved.)
My personal philosophy is to treat contracting and employment like oil and water. Both can be tasty. But they are different things and one does not merge seamlessly into the other.
Anyway, I learned. Thanks.
The problem here is obvious: the best candidates don't ever have to put up with stuff like this. They're actively courted by prospective employers.
Sure, not every candidate can be "one of the best candidates". But why would a rational employer select a screening process that overtly rules those candidates out?