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A programming task is scaring off candidates, should we ditch it?

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It is the first time that I am doing HR, and we are looking for a developer. The selection process is three rounds: technical phone interview, programming task (0.5 - 1 hr challenge), and then finally an interview with upper management and me.

The problem that I am having is that when I give some candidates (mostly fresh grads with 1 or 2 technical internships already under their belt) the programming task, they not only do not complete it in the given time frame (a week), but I don't hear from them again unless I follow up.

I'm thinking about ditching the programming task, but I really think it can help establish who really knows the languages listed on their resume.

How can I improve our hiring process?

UPDATE SINCE THIS QUESTION HAS BEEN POSTED

For the most part a lot of candidates are put off by the programming tests, which is very frustrating since I need to go through A LOT of candidates to find one that is willing to do it. With that said, I have found some willing to do them, and generally have found that:

a) It shows that they have a good attitude towards the company and role if they are prepared to go the extra mile to complete it.

b) They have programming ability. Sure they may have cheated but if they have attempted it, again, a good attitude for us is much more important since they will be much more easily manageable.

I have since hired a graduate developer, who attempted and completed the exercise successfully. He also completed all the additional 'bonus points' on the task. It is too early to say how good he is at his role, since he has only recently started.

On some occasions I do avoid giving the exercise to developers if they already have a strong portfolio working for good brands, and a track record. Since to get into the large brands he would have to do their own entrance tests.

SECOND UPDATE SINCE THIS QUESTION HAS BEEN POSTED

The graduate developer has turned out to be a star employee. We have kept him on and gave him a payrise.


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