Poor recruitment decisions can do great damage to a business. So how can firms avoid choosing the wrong people?

StrategicRISK’s annual risk management benchmark survey found that people risk was rated the second most pressing threat by risk managers, after economic conditions.

At the heart of those people risk concerns are the damaging consequences of making poor hiring decisions and being stuck with unsuitable employees.

Jeffrey Yeo, assistant director, Office of Enterprise Risk Management at Nanyang Technological University, says companies often taken an extended period to hire staff, especially at the executive level.

“This long period is not unusual considering the impacts on any organisation in the event of a wrong hire,” he says.

“The impacts are not just on the financial aspects of the organisation, but also the repercussions [are] on the organisation’s reputation and overall corporate morale.”

A report by recruitment firm Robert Half Finance & Accounting outlined the top four reasons for poor hires, Yeo points out. They are: mismatched skill set, unclear performance expectations, personality conflicts, and failure to fit into the corporate culture.

“One key reason for making the wrong hire is due to unclear job description and requirements that are being communicated to the human resources department of the organisation,” Yeo says.

“Root causes arise from miscommunication between the head of the hiring department and the human resources personnel in charge of hiring for the position.”

Yeo adds that other drivers for poor hiring decisions can be unsuitable and unstructured screening processes in the selection of the candidate, alongside improper job descriptions and requirements.

“The job description and requirements of the incumbent may not have been updated as the position could have been vacant for some time,” he explains.

“Due to situational changes, what was required then might have changed or be outdated now.”

Yeo stresses that it is not about recruiting the right candidate but rather selecting the most suitable one.

“Interviewing and selection of potential candidates is an art and not a science,” he says.

“Despite following certain selection criteria diligently and religiously, at the end of the day candidates are hired via intangible factors like ‘gut-feel’, ‘x-factor’, and ‘personal chemistry’.

“Training on interviewing skills and selection, in addition to practical prior experience in these areas for human resources managers, are instrumental in ensuring the whole process is as stringent and systematic as possible.”

Business impacts

Yeo says poor hiring decisions have consequences stretching across a company’s operations, finances, people and reputation.

“In terms of the operational aspect, the hired employee might not be able to perform up to the company’s expectations on them for the role and responsibility they are in,” he says.

“The hired person might not be able to integrate well with the company’s culture and, as a result, not be able to deliver at his optimum level – which will ultimately have adverse impacts on the overall productivity and efficiency.”

Yeo says in the event of poor performance of an employee, the company suffers costs both when the person is employed and in starting the hiring process over again.

“Overall morale of the team will also take a dent with a misfit at the helm,” he says.

“This will have even more detrimental impacts on the company’s reputation if the person is a member of the C-suite.”

Better decisions

The key to reducing poor hiring decisions plays out in three phases, before, during and after the interview, Yeo says.

“Before the interview, have a defined and updated job scope, responsibilities and personality requirements for the position,” he advises.

“Having detailed and updated requirements will help filter out non-relevant and insufficiently qualified candidates.”

For the second phase during the interview, Yeo recommends making personality tests a requirement for candidates to ascertain their suitability in meeting the job requirements.

“Depending on the level of position that the company is hiring, it is useful to have the various head of departments on the interview panel since this incumbent will be working with these departments,” he says.

“This will also create opportunities for the potential hire to interact and share with the panel their previous experience and success stories, and moving forward, how they can value add in their new roles.”

Yeo says this form of interactive communication can help when assessing the candidate’s past achievements and, most important of all, gauging whether the candidate makes the “culture fit” for the company.

For the third phase after the interview, Yeo says a company must conduct appropriate due diligence and reference checks on the selected candidate.

“If the potential candidate has come this far, due diligence and reference checks will be the pivotal point in the decision to make the job offer, he says.

“Though not fool-proof or guaranteed, by having a proper and systematic risk management procedures and standard operating procedures, the risks related from poor hiring processes can be greatly reduced and better mitigated.”