a question of balance – managing recruitment risk

““"Internal recruitment executives in many companies havesucceeded in instilling process and efficiency in their globalhiring practices, and in many cases adding science to whathad been considered primarily an art. Along with this hascome recognition of the risks involved in recruitment:good hires add value to the business, but bad ones – orbadly managed hiring experiences – can damage it inmany ways... While the sources of recruitment risk vary,they can usually be traced back to a lack of clarity about,and ownership of, the recruitment process."

Denis McCauley, Report author.

researchCORPORATE RESEARCH FORUM

A question of balance –managing recruitment risk

October 2015

Sponsored by


CONTENTS

Contents

About the research / About CRF 3

Foreword 4

Executive Summary 5

1 What are the potential consequences if your recruitment process goes wrong? 6

2 Sources of risk 9

3 Cross-border complexity 12

4 Checklist for minimising recruitment risk 14

5 Conclusion 15

All rights reserved. A question of balance – managing recruitment risk

No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means without prior permission in writing of the publisher.

Corporate Research Forum One Heddon Street Mayfair London W1B 4BD United Kingdom

ISBN: 978-0-9934094-0-0

3


ABOUT THE RESEARCH

About CRFFounded in 1994, Corporate Research Forum (CRF) is a membership organisationwhose international focus is on research, discussion and the practical application ofcontemporary topics arising from people management, learning and organisationdevelopment. CRF has become a highly influential focal point and network for over160 members representing a cross-section of private and public sector organisations.

• Its annual programme of research, events and publications fully reflects members’interests, in addition to the annual international conference. Side meetings and interestgroups are also initiated to meet challenges that members might have.

• Contributors are acknowledged experts in their field with a worldwide reputationas leaders and innovators in management thinking and practice.

• Sharing and collaboration among members is a key feature of CRF’s activities. We activelyencourage networking at all events, and especially through member lunches and HRdirector dinners.

• CRF is led and managed by highly-regarded former HR professionals who have a passion fordelivering excellence in the leadership and development of organisations and people.

CRF’s goal is to be valued for excellence, rigour, relationship building and providing anindependent view which, together, lead to measurable improvement in members’ peopleand organisation performance.

For more details on how your organisation can benefit from membership to CRF pleasecontact Richard Hargreaves, Commercial Director, on +44 (0) 20 7470 7104 or [email protected]. Alternatively, please visit our website at www.crforum.co.uk.

About the researchThis Corporate Research Forum report, sponsored by HireRight, is based on a series of in-depth interviews with senior recruitment executives and experts, as well as extensive deskresearch, conducted in June and July 2015. We would in particular like to thank thefollowing individuals for providing their insights:

• Greg Allen, Global Head of Resourcing, Lloyd’s Register

• Jonathan Briggs, Head of Talent Acquisition, IP & Science, Thomson Reuters

• Steve Bright, Director, International Human Resources, Northrop Grumman Corporation

• Scott Fitzgerald, Talent Acquisition Specialist, European Bank for Reconstruction andDevelopment (EBRD)

• Steve Girdler, Managing Director EMEA and Asia Pacific, HireRight

• Gary Knight, Group Head of Strategic Resourcing, First Quantum Minerals Ltd (FQML)

• Steve Wing, Director, Strategic Dimensions.

About the author

Denis McCauley is a writer, editor, speakerand moderator with particular expertise inhow businesses, governments and individualsuse technology. He has spent much of hiscareer with the Economist Intelligence Unit(EIU) in a variety of editorial roles, mostrecently as Editorial Director, ThoughtLeadership, EMEA. Denis also directed itsglobal technology practice and is the authoror editor of numerous technology andmanagement practices reports.

Denis McCauley

4


FOREWORD

Steve Girdler Managing Director EMEA and Asia Pacific, HireRight

ForewordIn an ever growing global workforce, one of the biggest challenges for recruiters is avoidinga bad hire. With the challenges recruiters’ face increasing, getting the right person for thejob is a hard task, and the stakes are higher than ever. One bad hire can destroy a company.As Warren Buffett so famously said, “It takes 20 years to build a reputation and five minutes toruin it”, therefore, mitigating risk should be a top priority for recruiters. They have to knoweverything about a candidate to ensure they are a good fit for the company and that thecandidate can do the role in question.

However, it cannot all be about mitigating risk and avoiding a bad hire. In the modernday, candidate experience is a vital consideration for all recruiters. A laborious and timeconsuming application process, poor communication and long delays in feedback are justsome of the things that can put off potential candidates, and with the globally connectedworld, sharing a bad experience with a mass audience is available at the click of a button,and can be potentially harmful to even the most well established reputation.

But how do you mitigate risk and not put off potential candidates? As Corporate ResearchForum (CRF) highlights in this report, it is all about getting a balance. Recruiters mustensure they protect their business from a poor hiring decision whilst also making thecandidate experience as easy as possible. It is about understanding the candidates’ needswhilst protecting their company’s best interests.

I am delighted that CRF chose to bring this subject into the industry spotlight. AtHireRight we screen over 12 million candidates a year for 40,000 clients, across 240countries and territories. Ultimately, our role is to mitigate risk for our clients but werecognise that screening is often stressful for any candidate and therefore strive to putthe candidate experience at the heart of the service.

Reducing recruitment risk is an essential part of any new hire and is something that can nolonger be skimmed over. The danger of a bad hire is real, and it is up to the HR communityto manage it.

Steve GirdlerManaging Director EMEA and Asia Pacific, HireRight

5


EXECUTIVE SUMMARY

Executive SummaryWith most of the world’s major economies in growth mode again,talent wars are heating up. The internal recruitment functions ofbusinesses large and small are straining to fill key roles, with the powershifting from the client to the candidate. Internal recruitment executivesin many companies have succeeded in instilling process and efficiencyin their global hiring practices, and in many cases adding science towhat had been considered primarily an art. Along with this has comerecognition of the risks involved in recruitment: good hires add value to the business, but bad ones – or badly managed hiring experiences –can damage it in many ways.

This report sheds light on the different types of risk involved inorganisations’ recruitment practices. It finds that when the biggestrisks materialise, the consequences can be as or more ruinous as amajor security breach or regulatory violation. It also uncovers that,while the sources of recruitment risk vary, they can usually be tracedback to a lack of clarity about, and ownership of, the recruitmentprocess. The report also examines how some organisations areseeking to minimise recruitment risk.

Key findings:

1. The greatest recruitment risk facing organisations today is hiring thewrong person. A bad hire can lead to loss of earnings, contracts,reputation or customers. It can also lead to a loss of other key staff,if morale is affected. The more senior the hire, the greater the risk.In the most extreme cases, a bad hire at chief executive or boardchairman level can bring down a business. Many organisations failto vet the backgrounds of their most senior hires thoroughly.

2. Overly long or poorly managed recruitment processes can result inthe loss of good candidates. With organisations’ greater attention to due diligence, the recruitment process is getting longer. In competitive talent markets, however, excessive deliberation inhiring can be costly. A lack of communication and engagementwith candidates during the process can have the same result.

3. Much recruitment risk stems from a loose brief – failure to carefullydefine the role requirements at the outset. Other key sources of riskinclude

• lack of transparency with candidates and internal stakeholders

• over-reliance on one part of the process (such as interviews ortesting)

• laxity in screening and vetting internal candidates

• inattention to the recruitment web portal.

4. Any one of these drawbacks is usually a symptom of a largerproblem – unclear ownership of the recruitment process. Uncleardivision of responsibilities between the hiring and recruitmentmanager leads to lack of accountability, and failure to ensureprocesses and timelines are adhered to and issues addressed.

5. The closer co-ordination of recruitment practices globally shouldserve as a complement to a company’s overall business strategy.Central policy is essential, but it needs to allow for localinterpretation. In-country teams must have the ability to adapt to local conditions. Vastly different hiring rules and practicesaround the world – for example, in interviewing, referencechecking or other aspects of background checks – dictate theneed for local flexibility.

Along with growing awareness of the risks involved in recruitment isrecognition that the company’s brand and reputation are at stake inevery hiring process. A well-managed process can improve the chancesof the right candidate being impressed and accepting the offer. Even ifthe candidate doesn’t make the cut, a good impression will have beencreated. Enough negative candidate experiences, however, especially ifshared widely in social media, can undo all the good work of buildingan employer brand.

6

1WHAT ARE THE POTENTIAL CONSEQUENCES IF YOUR RECRUITMENT PROCESS GOES WRONG?

Hiring the wrong one

In November 2013 Paul Flowers resigned in disgrace from his post as chairman of The Co-operative Bank, then one of Britain’s largest lending institutions, after being arrested on charges of purchasing recreational drugs. The board which recruited him in 2010 alsoresigned after it transpired that concerns about his experience and lifestyle were set asideduring the hiring process and his background not thoroughly vetted. This scandal, alongwith evidence of gross mismanagement by the executive team under Revd. Flowers’sstewardship, created a downward spiral in which the bank has come close to collapse.1

Although unusually high-profile, this episode underscores the greatest risk facing organisations’recruitment teams today – hiring the wrong person. The repercussions of poor recruitmentpractices are often not as dramatic as The Co-operative's, but they can be extremelydamaging, leading to loss of earnings, contracts or customers.

At Northrop Grumman, the country chief executives that Steve Bright, Director of InternationalHuman Resources, and his team hire, negotiate defence contracts at the highest governmentlevels. Gravitas, good diplomatic skills and demonstrably solid ethics are sine qua non fornew hires, he says. “At this level one misstep can completely undermine all the good workwe’ve done to build relationships.”

Hiring the wrong candidate can also have repercussions for staff morale and retention:colleagues may leave if they feel an underperforming new recruit is not dealt with. “Theimpact of bad hires is a lot wider than the time spent trying to manage someone performingpoorly or replacing them,” says Greg Allen, Global Head of Resourcing at Lloyd’s Register.

The more senior the hire, the greater the risk. According to the consultancy PwC, the averagecost to large firms of forcing out the chief executive officer (CEO) is US$1.8 billion inshareholder value.2 It is all the more concerning, then, that many organisations fail to vet thebackgrounds of their most senior hires thoroughly. Several of our interviewees observed thatpractices for senior hires across their industries are often patchy. One observes fromprevious experience, for example, that candidates for senior roles sometimes refuse tosubmit to psychometric testing. “Recruitment processes are often bypassed entirely in suchcases,” he says.

1 At the time of writing, the bank was in the process of being sold to hedge funds. 2 “A Forced CEO Turnover Costs a Large Company $1.8B More in Shareholder Value than a PlannedTurnover”, PwC press release, 13 April 2015.

7

researchCORPORATE RESEARCH FORUM 1

WHAT ARE THE POTENTIAL CONSEQUENCES IF YOUR RECRUITMENT PROCESS GOES WRONG?

According to a recent report half of the UK firms surveyed stated that ‘connections’ winhigh-level positions. Boards at almost as many companies (46%) rely on personalrecommendations when hiring new members.3 But, these hires needs to be supported bythe same background screening that would apply to any new senior hire, whichever routethey have taken to get there. In other countries, such as India, points out Steve Girdler,Managing Director EMEA and Asia Pacific with HireRight, a ‘cult of seniority’ prevails inwhich the people screening candidates find it difficult to ask tough questions of senior-levelpeople. “Important questions simply go unasked,” he says.

Losing the right one

Overly long or poorly managed recruitment processes can rebound on organisations in otherways. One is when good candidates slip through the net. London-based recruitment managersattending a Corporate Research Forum meeting in June 2015 reported that talent marketsare heating up in Europe and North America now that most economies are growing again.(Scarcity of skilled managerial talent has been a long-standing feature of emerging markets.)This is creating a dilemma for many firms, as the added attention to due diligence – partly tominimise the risk of bad hires – has also served to lengthen the recruitment process.

Steve Wing, Director of Strategic Dimensions, a UK-based executive search firm, reports thatfor the candidates it works with, the time between first interview and an offer being made islonger than ever. More than five interviews and assessment processes lasting several monthshave become commonplace. “Whilst due diligence is of course critical to making the correcthiring decision,” says Wing, “businesses also need to be aware that good candidates are indemand. Organisations that are decisive and move candidates quickly through the processwill snare the best talent.”

Source: HireRight. Data on discrepancy rates in background checks of candidates (EMEA data). The figures represent the percentage of cases where one or more discrepancies are uncovered.

49% = organisations in which senior leaderswho join as a result of M&A are not checkedbeforehand

34% = HR directors aware of a potentialscandal resulting from this that could affecttheir organisation

Source: The Untouchables: Protecting yourorganisation from leadership risk, HireRight, 2014.

Senior Hire Discrepancies in EMEA

More than half of hires have at least one discrepancy in their background screening

70%

60%

50%

40%

30%

20%

10%

0%

Jan 13

Mar 13

May 13

Jul 13

Sep 13

Nov 1

3

Jan 14

Mar 14

May 14

Jul 14

Sep 14

Nov 1

4

Jan 15

Mar 15

49%

34%

3 The Untouchables: Protecting your organisation from leadership risk, HireRight, 2014.

8


WHAT ARE THE POTENTIAL CONSEQUENCES IF YOUR RECRUITMENT PROCESS GOES WRONG?

1

Jonathan Briggs, Head of Talent Acquisition, IP & Science for Thomson Reuters, a businessinformation provider, confirms that in some markets excessive deliberation in hiring can becostly: “We’re exceptionally quick in San Francisco, for example, where the market fortechnology talent is extremely tight; if we were slow we would just lose candidates.”

A matter of legality … and reputation

A screening process gone awry can land organisations in legal hot water. Inappropriatequestions posed during interviews are a common source of employment tribunal hearings.Even job descriptions can lead to problems, warns Greg Allen of Lloyd’s Register. In the UK,the job description is the tool for selection, and designs the questions and skill setsrequired in the fair selection process. Too prescriptive a job description could lead to nocandidates; too vague could bring claims of discrimination on gender, race, age or othergrounds, he says. (See “Cross-border complexity” later in this report.)

As we will discuss later, transparency and good communication can keep candidates onsideeven in a lengthy recruitment process. Their absence, however, may not only cost theorganisation the best hire, but can also damage its brand. Poor candidate experience willalmost certainly hurt the organisation’s image in his or her eyes. “If the candidate has anegative experience where the hiring company isn’t completely open about what to expectfrom the entire recruitment process, including the outsourcing of services such as psychometrictesting and background screening or not get back to them in a timely manner,” says SteveGirdler of HireRight, “that can have a knock-on effect. The candidate may be an existing orpotential customer that will look at you in a different light.” In the age of social media andwebsites such as glassdoor.com, a disgruntled candidate can also spread the word aboutsuch negative experiences widely.

Good management of the entire candidate experience is thus critical if organisations wantnot only to protect their overall brand equity, but to build their employer brand.

9

2SOURCES OF RISK

Why does recruitment sometimes go wrong? Below we discuss some common failings inthe recruitment process. However, when something goes wrong, it is usually a symptom ofa larger problem – unclear ownership of the recruitment process.

In most large organisations – particularly in the developed world – the recruitment function is highly professional, with a great deal of process and rigour. All too often, however, hiringmanagers take the lead on filling vacancies and seek only tangential support fromrecruitment professionals. Other hiring managers exempt themselves from the processentirely until it is time to interview screened candidates.

Decision by committee can be another manifestation of unclear ownership. This is not alwaysthe case: there are often good reasons to widen the universe of senior managers involvedin the screening process. Steve Bright of Northrop Grumman maintains it is critical for thetypes of high-profile country roles that his team fills. This is not only to vet the candidatethoroughly and ensure no one on the senior executive team has red flags. It is also, saysBright, “to get their emotional buy-in to the candidate when the latter is appointed, becausefor that individual to be successful when they’re back in-country, they need to know theyhave the backing of the executive team.”

Handled the wrong way, however, committee decision making can lead to a loss ofaccountability and to indecision. Jonathan Briggs of Thomson Reuters observes that “whenpeople get nervous in the recruitment process they throw more people into it, which createsmore indecision.” This can lead to the loss of good candidates as they tire of the process.

Following are specific manifestations of unclear recruitment processes – and sources ofrecruitment risk.

• The loose brief

“If you end up getting the wrong person, or if the process takes too long, nine times out often you will find that there wasn’t a good enough quality conversation at the start abouthow you’re going to hire and the type of hire it needs to be.” Jonathan Briggs explains why a failure on the part of the hiring manager and recruitment manager to define the jobprofile with precision – and especially what new requirements the role may entail – canresult in hiring the wrong person.

Gary Knight, Group Head of Strategic Resourcing at First Quantum Minerals Ltd (FQML),agrees: “When a vacancy arises, managers often assume they need to hire someone withthe same skills as the person departing. Hiring managers – with the help of their recruitmentcolleagues – need to ask where the business is going and whether the role needs to bechanged accordingly. Every vacancy should be an opportunity to rethink the role.”

One-third of UK HR directors say thatevery time they recruit a new boardmember, they use a different process

Source: The Untouchables: Protecting yourorganisation from leadership risk, HireRight, 2014.

“If a rocket’s fired and is one degreeoff course, you don’t notice it much inthe first couple of seconds, but at 30seconds it can be a kilometre or twooff course. It is similar with the hiringbrief – it sets the direction foreverything you do.”

Scott Fitzgerald, Talent Acquisition Specialist,European Bank for Reconstruction and Development

“If I had my way nobody would beable to conduct an interview unlessthey’d received some form ofaccreditation.”

Jonathan Briggs, Head of Talent Acquisition, IP and Science, Thomson Reuters

10


SOURCES OF RISK

2

• Failure to communicate

Good candidates normally have multiple irons in the fire, and will walk away if they feelignored during a protracted hiring process. “Feedback we receive from our candidates suggeststhat how they are engaged by the potential employer throughout the process colours theirdecision on whether to accept an offer,” relates Steve Wing.

With growing recognition of the importance of due diligence, a lengthy recruitment processmay in many cases be unavoidable. This need not mean that candidates will withdraw, providedthey are kept informed and engaged along the way. This may be as simple as communicatingtime frames when an additional interview or test can be expected to take place. “The marketis tight, meaning time is of the essence, yet at the same time more robust screening andselection are required,” says Scott Fitzgerald, Talent Acquisition Specialist at the EuropeanBank for Reconstruction and Development (EBRD). “To strike the right balance requires goodrelationship management with all parties, both internally and externally, and making sure thatwhen you’re defining the process you put in a clear timeline right from the onset.”

An explanation of why a candidate wasn’t selected, along with some constructive advice onareas for improvement, can also go a long way to building the employer brand. A lack ofcommunication throughout the process or a perfunctory rejection notice, on the other hand,can move some to share poor feedback on social media.

• Over-reliance on one part of the process

Recruitment professionals generally regard interviews as a flawed but necessary part of thehiring process. Multiple interviews allow hiring managers and other key executives to askprobing questions of a candidate, and also to build a personal picture of his or her cultural fitwith the team and organisation. Interviews are only one part of the puzzle, however, and poorquestioning (see below) can limit their value.

This recognition led to psychometric and other forms of testing to become standard at manyorganisations as long as two decades ago. The benefit for many recruitment practitioners hasbeen to add a substantial quantitative basis to the selection process. “There’s been anincreased emphasis on data in the past few years,” says Scott Fitzgerald. “This has pushedtests to the forefront, because people want quantitative results that they can analyse and useto justify their hiring decisions.”

Psychometric tests also have limits. Some high-profile examples of executive wrongdoing,including lying about credentials, have involved individuals who went through testing whenthey were hired. Likewise, testing plays an important role in assessing capability and fit butcannot uncover flaws in ethical behaviour. The lesson is to weigh each part of the screeningprocess in a balanced fashion.

• Failure to coach interviewers

“Managers are generally not very good at interviewing,” says Gary Knight. “They default tointerviewing people based on their technical skills, and they base their decisions on whether ornot they like them.” This is a common complaint among recruitment managers interviewed forthis report. Most people involved in the hiring process, in Scott Fitzgerald’s view, have aninflated impression of how good a judge of character they are. “This represents a big risk in theinterview process,” he says.

11


SOURCES OF RISK

2

Managers at all levels need coaching on how to conduct an interview effectively. Feworganisations provide this in a systematic way. As the resources at their disposal grow,mandatory training in the art of interviewing may be expected to become more common inmanagement development programmes.

• Inattention to the ‘shopfront’

The recruitment portal on the employer’s website often serves as the candidate’s introductionto the organisation, and his or her main source of information during the hiring experience.Organisations must pay attention to the ‘shopfront’, which should be user-friendly andinformative for the candidate, and kept up to date. Like other elements of the process, aprofessional looking and informative recruitment portal can help create a positive candidateimpression.

• Lack of discipline in internal recruitment

When internal and external candidates apply for vacant positions, they are not always treatedequally in all parts of the recruitment process. When it comes to screening, Steve Girdlerbelieves organisations generally have a less comprehensive approach to internal candidatesas opposed to external ones.

Lloyd’s Register, says Greg Allen, treats all candidates the same. An internal candidate must gothrough the same interview process as externals, and is measured against a standardcompetency framework from the job description. At senior level, internal candidates must alsogo through the same external search process. “We need them to measure up to industrystandards and expectations,” he says.

Turning weakness into strength

“Don’t look for perfection in the marketplace. A good training programme will help to addressa new hire’s weak areas.”

This advice from one interviewee has been takento heart by Northrop Grumman. Psychometrictests, says Steve Bright, are instrumental inhelping the hiring team make the right decisionabout a candidate. But their use doesn’t stopwith the job offer. A new hire’s weaknesses thatare identified in testing are a focus of thecompany’s 90-day development plan. The four-phase plan – encompassing pre-employment,the first 30 days, the first 60 days and the first90 days – incorporates standard elements ofmost on-boarding programmes, includingpersonal goals set by the new employee, outputsto be provided by their line manager and steps tobe taken by HR. As part of the plan, an internalmentor is appointed who helps the new joinerto navigate their way around NorthropGrumman’s U.S. organisation.

The mentor, however, is someone whorecruitment and HR deem is best suited towork on the new hire’s chief blind spot. Brightexplains: “If we hire someone with a goodaerospace background but who doesn’tunderstand enough about the cyber-world,then we’d appoint a mentor from the cyberside of the business; that mentor will also help explain how the U.S. organisation works.Because if you’ve not worked for a U.S. defencebusiness before, it’s quite complicated.”

Bright’s team then appoints an external coachwho continues to work on the new manager’sweak areas as identified in the psychometrictesting. The external coach may stay on beyondthe 90-day period if necessary. If the newmanager is senior, Bright himself will meetregularly with the coach and the individual to work on what amounts to a constantdevelopment plan.

Northrop Grumman is far from the onlyorganisation to take this approach. BothThomson Reuters and Lloyd’s Register, forexample, takes new hires through the results of their behavioural tests and discussespotential areas for a development plan.

The biggest risks of not screening leaders

Damage to reputation of the business

Leadership which has negatively affected...

Damage to culture

Rise in fraud

Loss of company confidential data

Management that is not aligned with the...

Theft

Increase in staff turnover

Falling share prices

Decrease in company profits

58%

56%

54%

51%

50%

46%

46%

44%

44%

41%

Source: The Untouchables: Protecting your organisation from leadership risk, HireRight, 2014.

12

3CROSS-BORDER COMPLEXITY

The key question for multinational organisations is: what degree of co-ordination isnecessary? Most – though not all – of the recruitment executives interviewed for this reporthave sought to create a global recruitment template of one sort or another. All, however,recognise that a highly centralised approach could do more harm than good.

Degrees of centralisation

“Our model is very de-centralised,” says Gary Knight of FQML. “We pride ourselves – inrecruitment as well as management decision-making – in being very nimble. We provideguidelines, and expect people to take responsibility and accountability for working withinthose guidelines whilst not stifling their ability to solve problems in different ways.” Thereason for the de-centralised approach, he explains, is simple: “All of the countries weoperate in are different. All of the roles that we are hiring for are different and requiredifferent levels of intervention, so we don’t have a one-size-fits-all approach.”

Thomson Reuters, according to Jonathan Briggs, takes a regional approach when applyingrecruitment guidelines. The US and UK are treated fairly similarly, he says, along with Europe,but with distinct treatment of some European markets such as Germany. Asia is entirelydifferent: Japan, Singapore and Hong Kong are highly competitive markets for the types oftalent Thomson Reuters employs, and Briggs says the hiring process for many high-levelpositions likely to take a lot longer there than in Europe or the US. External recruitmentagencies are also more commonly used in Asia than elsewhere.

At Lloyd’s Register, Greg Allen has developed a global template – based on an algorithm –which specifies the different hiring conditions, including different rules and restrictions,prevailing in each country where it operates. This, he says, has become an extremely usefultool in managing recruitment risk at the global level (see the column).

Legal minefields

Vastly different hiring rules and practices around the world dictate the need for some localflexibility. Steve Girdler points out that countries have different rules on background checks,ignorance of which could land a company in court. Poland, for example, recently introducedrestrictions on credit and criminal checks. European courts are paying attention to wherecandidates’ personal data gained during screening is held. If it is stored in the US – which hasdifferent data privacy rules than the European Union – a European employer could face sanctions.

Candidates with international experience can make the screening process more complexeven in their home country, says Girdler. “If you’ve got someone who’s worked in Angola,Saudi Arabia and Taiwan in the past five years, it’s going to take longer to check on theiremployment history or their credit and criminal history than it will if they’ve never workedoutside the home country.”

Lloyd’s Register’s global recruitmentalgorithm

Lloyd’s Register has developed an algorithm toguide how it recruits talent in different countries.Part of the algorithm, Greg Allen explains, is aratio that compares the actual time against thetheoretical time to recruit in each country.4

“The ratio looks at the time from applicationand screening to first and second interviewthat results in a placement. Through this wecan determine what the average recruitmentcycle looks like, and then compare that withour theoretical model.” The ratio also takesinto account the relevant legislation in eachcountry – another indicator of how difficult it is to source talent there.

Combined, these not only help determine howeffective the recruitment process is in thecountry, but they also allow Allen to plan thenumber of recruiters he will need to fill thetargeted number of roles there. “The algorithmallows us to monitor and look at what we havedone in the past as a predictor of what we aregoing to use in the future,” he says.

It all builds up to a global ratio. This enableshim to compare any country’s recruitmentperformance against the global standard. “Azero means that country has hit the target onthe nail; above zero means that it’s getting lessefficient, while under zero means it’s gettingmore efficient.”

The underlining algorithm is reviewed andupdated about every two years. Now his team istrying to determine if their recruitment successrate has actually improved since they startedusing it.

4 In May 2015 Greg Allen was named In-House Recruitment Leader of the Year by the Recruiter website.

13


CROSS-BORDER COMPLEXITY

3

Obtaining legal permits for newly hired expatriates is another risk. FQML hires expats towork in its Africa mining businesses, and Gary Knight reports that the due diligence requiredfor a work permit or visa is getting more complex. “This is starting to become a challengein certain countries where we operate,” he says.

Cultural nuances

Tracking rules and restrictions should (in theory) be straightforward. Navigating the differentcultural norms around hiring in different countries is trickier. Background checking, for one,needs to be tailored to the established practices in each country. In Japan, for example,according to Jonathan Briggs, it’s not accepted for background checks to be intrusive oraggressive. In some Asian cultures there’s a reluctance to ‘grill’ senior candidates in interviews.

The kaleidoscope of varying legal and cultural norms makes it difficult to enforce globalrecruitment policies too strictly. Probation is another good example: not all organisations havestandard probation periods, but those that do find they are generally accepted, and adhered to,in the US and UK. In other countries, and depending on the position being filled, probation maynot make sense at all.

Gary Knight says that FQML has a standard three-month probation period but it is not alwaysenforced strictly. “Who wants to admit three months after you’ve made an important hire thatit was the wrong decision? We need to educate managers more on how to use probationeffectively.”

Senior country roles at Northrop Grumman are too visible to have a probation period, saysSteve Bright. “After announcing to an ambassador or prime minister that you’re making a bigcommitment to the country in hiring a high-profile individual to lead the business, you cannotthen say this person will be gone if they fail their probation period. Doing that would criticallyundermine our strategy for the country.”

14

4CHECKLIST FOR MINIMISING RECRUITMENT RISK

Define the recruitment process clearly, and establish accountability.No business operations run effectively without clear processes to guide them – recruitment is no exception. Even if hiringdecisions are made by committee, someone must be fully responsible for ensuring the processes and timelines are adhered to.

Think global, act local. Global guidelines are necessary to ensure the organisation’s core standards are met, both for new hires and the recruitmentprocess itself. However, every country is different – some degree of local flexibility is imperative.

Get the brief right.Every position should be reviewed by the hiring manager when it becomes vacant and the requirements updated. Rigour at thisstage will help minimise the risk of a bad hire later, and could save time.

Explain and communicate.Keep candidates informed and be clear about timelines. Explain the whole approach upfront including the process for anyoutsourced companies, what they will ask for and why they are being used. Those who feel ignored or unwanted are likely to lose interest in the organisation, and may harm the employer brand if they are vocal about it.

Train your interviewers.Few managers always probe candidates effectively in interviews. Training in the art of the interview should be part of managementdevelopment programmes. Hiring and recruitment managers should at least discuss the line of questioning before interviews.

Beware gut feel – test thoroughly. Personal endorsements and impressions gained in interviews have a place in selection decisions, but they only provide a partialpicture of a candidate. Testing is also just one part of the process, but it can uncover weaknesses – and strengths – not apparentelsewhere.

Work on the new hire’s weaknesses.No candidate is perfect – weaknesses uncovered in an otherwise strong contender for a role need not disqualify them. Weak areas can be targeted in the candidate’s development plan after joining.

Good, ethical behaviour counts just as much as skills.From a risk perspective, thorough probing into a candidate’s behaviour, through testing, reference checks and background checks, is paramount. Skills can be developed even at senior levels; but it is a lot harder to change bad behaviour.

Talk with your corporate risk manager.A hiring process gone wrong can have damaging consequences for a business. Keeping the risk manager up to date will create a fuller picture for senior management of the company’s risk exposure. Much can also be learned from the risk function aboutmitigation.

Make rigour in recruitment your organisation’s selling point.Rigorous interviewing, testing and screening should convince candidates that the organisation is serious about doing things right,and should also help strengthen the employer brand.

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5CONCLUSION

So is successful recruitment an art or a science? In recent years a good deal more sciencehas been added to the body of recruitment practice in the form of psychometric and othertesting, advanced data analysis, and the use of algorithms and models. Gary Knight is oneproponent of the scientific approach: “We wouldn’t accept decisions about a sales strategyor a marketing plan, or in any other part of the business, based on a manager’s gut feel.Why should we do it with our people?”

The management of recruitment risk is not yet a discipline in its own right. It may neverneed to be, provided the recruitment function as a whole, as well as the executives whomanage each individual hiring process, recognise the potential risks to their organisation ofpoor recruitment management. The application of scientific methods will undoubtedly helprecruitment managers identify risks in any hiring process and plan accordingly.

But even for those who believe strongly in the art of recruitment, process and rigour areparamount. “The best way to minimise risk in recruitment,”says Jonathan Briggs, “is tohave a really robust selection process. It is not having four people meet a candidate forcoffee. Not only do you get a better result, but a good candidate will have more respectfor an organisation that tests them through the recruitment process than one that simplycourts them.”

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a question of balance – managing recruitment risk

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