Should we bring back the ‘rule of three’?
Jeff Neal, former DHS Chief Human Capital Officer Jeff Neal, asks whether hiring managers should use the "rule of three" when considering applications from disa...
Commentary by Jeff Neal
Founder of ChiefHRO.com
& Senior Vice President, ICF International
This column was originally published on Jeff Neal’s blog, ChiefHRO.com and was republished here with permission from the author.
The rule of three was the target of reformers for years. It limited hiring consideration to the top three candidates on an OPM or Delegated Examining Unit certificate. The top three were identified by rating their applications, assigning scores, and then adding either 5 or 10 points for preference-eligible veterans.
Compensably disabled veterans “floated” to the top of the list. Hiring managers generally hated the rule of three. If 100 people applied for a job, the hiring manager was limited to looking at the top three. If someone with veteran preference was #1 or #2 and a non-vet was #3, they could not be considered. Hiring managers thought their options were being restricted and often thought candidates who did not have the top three scores were better qualified than those that did.
An MSPB study issued in December 1995 determined those concerns were overstated, but concluded the rule of three was not effective and did more harm than good. They suggested adopting alternatives, including category rating. The President’s 2010 hiring reform directed agencies to stop using the rule of three and start using category ranking (which had been available to agencies as an option since it was included in the Chief Human Capital Offers Act of 2002 (itself part of the Homeland Security Act of 2002.
With category rating, applicants are placed in two or more groups. Applicants who are eligible for veteran preference are listed ahead of individuals who are not preference eligibles. With the exception of scientific and professional positions at GS-9 of the General Schedule (equivalent or higher), qualified preference- eligibles who have a compensable service-connected disability of 10 percent or are listed in the highest quality category. Selecting officials may select any applicant in the highest quality category. OPM published extensive guidance on category rating in its Delegated Examining Operations Handbook. 
Implementation Problems
The biggest problem with category rating is not the process itself, but how it is implemented.
When using category rating, it is critical that assessment of candidates be thorough, defensible, and based on criteria that will result in a group of candidates in the top group who could excel in the job. Otherwise it produces a gaggle of applicants whose skills may range from top-notch to not-so-hot.
In a case of “be careful what you ask for,” hiring managers are complaining that they are getting referral certificates with too many candidates. Too many candidates is almost as big a problem as too few, because it becomes difficult to interview all of them, reduce them to a manageable level and make a selection.
Because veteran preference-eligible candidates are listed first in each category, hiring managers can often select from only the veterans on the list, even if there are better qualified non-veterans. The large numbers of referrals also raise expectations among those who are referred and create resentment when they are not selected.
Non-veterans may believe they were unfairly excluded, while veterans may conclude their preference rights were violated. That happened with the rule of three too, but the numbers were much smaller and candidate expectations of selection were lower.
The move to category rating was intended to provide hiring managers with more flexibility, but the unintended outcomes do not serve agencies or applicants well. The good news is that the problem is not hard to fix and does not require any changes to hiring regulations or veteran preference.
Better Assessments Are the Solution
Category rating works effectively only when the top category is limited to those applicants who are clearly able to perform successfully in the job. The best way to identify that top group is using valid assessment instruments that clearly differentiate those candidates who are most likely to be successful from the rest.
A narrowly defined top category ensures any candidate in the group would be able to successfully perform the duties of the job. When that happens, any veteran who “blocks the list” is someone who clearly has the skills for the job.
If agencies conduct better assessments and more narrowly define the best qualified category, the problems with category rating mostly go away. The number of candidates who are referred becomes more manageable. Veteran preference is preserved and hiring managers are assured referral lists include only those who are well qualified for the job. That should also help with the perceptions that veterans are being denied the preference they are guaranteed by law and the opposite perception that veterans are given too much preference.
When proper assessments are used, category rating is an effective tool that gives managers more candidates, candidates more opportunities for consideration, and veterans a higher selection rate. So my conclusion is that the rule of three really was as bad as we remember and it should remain dead.
Jeff Neal is a senior vice president for ICF International and founder of the blog, ChiefHRO.com. Before coming to ICF, Neal was the chief human capital officer at the Department of Homeland Security and the chief human resources officer at the Defense Logistics Agency.
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