The reason I'm not a fan of that process is because how long it would take. I'm not a fan of when companies think the interview process has to be crazy long to vet people. I feel like you should be able to figure that out with 2 interviews in my mind.
Plus I feel the projects add soo much stress that you don't feel every day while working on the job. It also pretty much takes away anyone that is currently employed. Someone who works full-time already with a family at home should not be asked to take time away from their family to get a job. In my mind that process is asking for that. There are A LOT of very good programmers who don't take their work home with them nor should they be expected.
I am on board with the pair programming. Let them work with the team. See how they get along with the team. Maybe even a team lunch. You can figure out a lot about someone through that. Simulate how they would work everyday.
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