How to manage risks inherent in recruitment

How to manage risks inherent in recruitment

 

Hiring is a fundamental part of business, and how it is done affects the quality of human capital and skills that an organisation accumulates over time. Consistently hiring the right people can be a key component of growth, while making too many mistakes in this regard translates into unexpected future costs.  

Bad hires are more common than we think  

Unfortunately, hiring decisions can often go wrong. According to a 2017 survey by CareerBuilder, 74% of employers admitted to hiring the wrong person for the job, losing an estimated average of almost $15,000 per poor hire. This is because every aspect of hiring, letting an employee go, and re-hiring costs a business time and money. Broadly speaking, these costs can be summed up into three categories. 

  • Lost productivity. Choosing an unsuitable candidate for a job leads to wasted time, as they are unlikely to be able to perform the required tasks properly. The organisation may be investing time and resources in the new hire, yet not see the desired level of output in return.
  • Inefficiency. A bad hire can disrupt the atmosphere and synergies within the team they placed in, or worse, are meant to lead. Colleagues may have to take on extra work to cover for others’ shortcomings, which can lead to frustration and missed deadlines. 
  • Replacement costs. The entire recruitment process, from sifting through applications and interviews to onboarding a new hire, has an associated financial cost. To replace a bad hire, the same process must be repeated with re-allocation of people and resources. Additionally, while a replacement is found, productivity losses and inefficiencies can persist.    

Which key risks should you watch out for?

Multiple pitfalls are present throughout the typical hiring process, and companies need to cognizant of these main ones. 

  • False credentials. Candidates may sometimes report false information on their resume, such as the university they graduated from, the type of their academic degree, or the proficiency of skills possessed. According to an industry survey conducted in 2022, 58% of hiring managers reported finding lies on candidates’ resumes. 
  • Troublesome past behaviour. Creating safe spaces for staff and customers is a company’s responsibility, and background checks on a potential candidate can reveal past untrustworthy or dangerous behaviour. If trouble arises, legal claims can be made against the employer for ‘negligent hiring’. In addition, a candidate hied under false pretences is unlikely to be a productive or reliable one.
  • Legal challenges. If a company’s hiring policies and practices are undocumented – and therefore inconsistent – former employees or job applicants may allege unfair treatment or discrimination which can lead to costly legal battles. In 2021, Business Insider reported that 99% of Fortune 500 companies have paid settlements in at least one discrimination (or sexual harassment) lawsuit since 2000.
  • Losing out on the good ones. The best candidates in the market are usually fishing for multiple opportunities, therefore hiring managers need to be decisive. An organisation risks losing out on good candidates if its internal recruitment practices are inefficient. For example, recruitment cycles can be too long or recruiters are not trained well enough to make the interview experience appealing for candidates. According to HR Watchdog, 77% of professionals lose interest in a job if they don’t hear back from the employer within 3 weeks of the initial interview, while on average, 65% of candidates lose interest after a bad interview experience.

How to be on guard 

Organisations need to reconsider the way they approach the recruitment process. While all risks cannot be avoided all the time, they can certainly be minimised with effective internal controls and procedures. 

  • Implement a rigorous selection process. The hiring process must include behavioural interviews, skills assessments, and reference checks to arrive at a holistic evaluation of each candidate. These steps should aim to generate insights about whether a candidate has the right motivation for the job, whether their skills are relevant, and if they fill be a good fit for the organisation’s culture. 
  • Keep hiring policies consistent with relevant laws. Employers must ensure that hiring managers are fully aware of all the law and regulations regarding employment in their jurisdiction, and any potential legal challenges that could arise. This way, possibly expensive violations can be avoided.
  • Document hiring policies and ensure compliance. Coherent, consistent, and legally compliant hiring policies must be drafted, and periodically updated as required, which detail the dos and don’ts of hiring. This will ensure that the right due diligence is done when assessing a candidate, avoiding potential bias and discrimination during the hiring process.
  • Train staff and management. All parties involved in the hiring process must be trained in recruiting and hiring. Only supplying them with written policies is not enough, and training can remove any subjectivity stemming from managers’ personal assessments. It can also help them manage the future employer-employee relationship better.
  • Work with hiring experts. For employers who feel that they might not have the time or knowledge to properly undertake the different steps involved in hiring (skills assessment, background checks, verification of employee data, etc.), they should consider working with professional recruitment experts.

The journey of every employee in an organisation is heavily impacted by the initial step, the hiring process. From the employer’s perspective, if the complexities and risks in this process are ignored, their organisation can potentially suffer the consequences in terms of lost opportunities, financial costs, and potentially damage to their internal culture.