Hiring Shortcuts that Can Cost More than They Save

Organizations are determined to hire the right people–those who have the right skills, fit with the organizational culture, and bring a willing attitude to the job.

Locating, researching, and interviewing job candidates is time consuming and expensive. Like every other aspect of business, managers seek appropriate tradeoffs to balance risk and reward in hiring because cost matters.

The drive to control expenses can lead to some bad choices. Hiring managers may be led to choose shortcut methods for evaluating candidates that promise benefits without compensating costs. But the fact is there are often consequences to these tempting methods that are more costly than alternatives that seem on the surface to be more expensive or slower.

Hiring shortcuts can cause many kinds of problems, but in the current environment three areas of concern stand out: fraud, legal compliance, and social profiles. In each of these areas, there are strong motives to simplify or take advantage of “free” resources. But there are also potential costs when things go wrong, and these costs can be substantial.

Relying on intuition to hire good people

It may be impossible to completely stop fraudulent activities in an organization. The employee who becomes a fraudster is often a long time employee who, for various reasons, takes advantage of an opportunity to steal from his or her employer.

But there is a very substantial reason to try to avoid hiring the people who become fraudsters. The Association of Certified Fraud Examiners (ACFE) has published a series of reports on the incidence of occupational fraud that show that this crime costs 5% of top line revenue across all organizations every year. This huge loss is spread across organizations of all types and sizes, and the fraudsters include people from all levels, from shop clerk to C-suite managers and owners.

Even though there is no foolproof way to eliminate the risk of fraud completely, there are some practices that help to prevent it. They require time and effort in the hiring process, but they will repay the expense over time.

First, intuition is a bad bet in hiring. Almost every hiring manager uses intuition in making employment decisions. With their extensive experience and deep knowledge of their organizations, it is easy to understand why they would do so. Unfortunately, research (like this) shows that intuition cannot beat solid analysis. Employers need to get the facts and follow them to a logical conclusion.

However, even employers who develop a systematic procedure for hiring based on facts can be deceived. Some of the applicants for a job may be trying to distort, evade, or just invent information in order to get the job. Recent research sponsored by the SHRM Foundation found that resume fraud is a growing problem, with lies ranging from minor exaggerations to full-blown inventions of amazing scope.

The core insight from the research is that applicants who have had deviant behaviors in the past are more likely to have them in the future. So the first line of defense against occupational fraud is a thorough and objective background screening designed for the job in question. There can be no exceptions to doing the due diligence required, even for the very top positions in the organization (as former Yahoo CEO Scott Thompson’s case illustrates).

Beyond careful vetting, every owner or manager needs to do a comprehensive risk assessment of the organization to identify where risks of fraud occur. Well-designed audit and internal controls will help to prevent, or at least detect, occupational fraud.

Failing to Keep Pace with Compliance

Every HR professional understands that employment practices are highly regulated. However, the laws are growing more complex as local, state, and federal jurisdictions are all expanding requirements. Compliance is more than a legal or ethical issue: failure to comply can lead to very costly lawsuits.

There are two trends in employment law that are essential for compliance: the federal anti-discrimination law based on the Civil Rights Act of 1964, as implemented and updated by the EEOC, and the rapidly increasing “Ban the Box” laws being adopted in local and state jurisdictions across the nation.

At their heart, both of these legal trends share the goal of increasing employment opportunities for ex-offenders. When society explicitly demands rehabilitation from ex-offenders, it is unfair to deny them employment when they try to comply. Yet in a string of lawsuits in recent years, the EEOC has accused employers of discrimination that does just that. Employers have won a few of these lawsuits, but in others they were forced to pay damages in the low seven figures.

Employers can stay on the safe side of the compliance issue with some effort. There are some basic concepts and practices that will help. These practices will impose some time and cost, but shortcut methods that ignore them put the organization in jeopardy.

The crucial concept in the EEOC Guidelines for the use of criminal background records in employment decisions is that using the information must be job-related and a business necessity. In other words, just because someone has a criminal conviction should not disqualify him or her for employment if they can still be expected to do the job in question successfully.

The immediate implication of this concept is what drives the Ban the Box trend. The various Ban the Box laws have different coverage and penalties, but they all share one thing: they prohibit the use of the check box or simple yes/no question on an application asking whether the applicant has a criminal record. In many versions, the inquiries about criminal history cannot be made until after the person is given a first interview or even a contingent job offer.

In other words, these laws seek to prohibit blanket exclusion policies that do not distinguish between the specific circumstances and characteristics of each applicant. The wise employer will avoid blanket exclusion policies.

Yet employers have a legitimate right to research and use criminal history in employment decisions. The EEOC Guidelines include a way to square this circle using something called an “individualized assessment”. The basic thrust of this process is to gather additional information about an applicant who would otherwise be excluded from employment because of a criminal background. Further, the applicant is to be given access to the information used to exclude him or her, and a chance to rebut it.

It is admittedly difficult for employers to stay current with all the applicable laws in their jurisdiction. And there are numerous local, state and federal databases to search when looking into criminal history. But the processes and requirements laid out in this law will sharpen the employers’ ability to hire fairly, but also to hire well.

Yielding to the Temptation of Social Media

Peering into the prolific social media profiles of your applicants looks like a freebie that is easy to access and untraceable to the anonymous employer. In fact, surveys indicate that a large and growing number of employers do look into applicants’ Facebook and LinkedIn profiles, among others, on the belief that the information there may reveal the true person.

The important thing to understand is that this social profile data is subject to the same legal restrictions as any other kind of data, and if it is used in a discriminatory way, the same penalties could apply.

There is a special problem with social profiles. Once the employer opens a profile, it is impossible to prove that certain personal characteristics of the applicant were not used in the employment decision. If the decision is adverse, excluding the applicant, and there is information in the profile that is related to a protected class under the Civil Rights Act, a charge of discrimination could be made.

Stay smart

Smart employers will not cut corners in doing the due diligence needed to make good employment decisions. Some of the demands this places on them are onerous, but the alternative shortcuts can be very expensive in the long run. Best of all, following the right procedures will more likely yield the good hires employers seek, and then the long run impact is very good for the organization.

Individualized-Assessments-blog

About Michael Gaul

A security industry professional since 1988, Michael has extensive expertise in the fields of human capital risk management, physical security, and background screening process management. Michael leads Proforma’s sales, marketing, and strategic customer relations efforts.
View all posts by Michael Gaul →