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Mitigating Hiring Risks: A step-by-step guide

Mitigating Hiring Risks: A step-by-step guide

What is a hiring risk and why is it an Important consideration?

Companies must balance the need to quickly fill positions with trying to ensure they hire the right person for every role. Naturally, as an employer, you have thought about the consequences of a bad hire. Even for the most diligent HR departments, the dreaded bad hire can happen - but background screening, probationary periods, contingent offers, training programs, and other onboarding tactics can help minimize that possibility. Hiring the wrong person can be disastrous, but when it does happen, it is important to know how to identify it and the steps you can take to improve the situation. 

The types of hiring risk

Legal risk

Although most businesses are aware that they must avoid making discriminatory hiring decisions, some may not realize the serious legal implications that the application and interviewing processes pose. All job ads, interview inquiries, reference and background checks, and employment offers must be made in a way that eliminates bias and complies with local law. 

The issue is complex, and you could be unknowingly asking questions that are illegal or even discriminatory. For example, in the UK, the protected characteristics under the equality act 2010 are:

  • Age
  • Disability 
  • Gender reassignment 
  • Marriage and civil partnership 
  • Pregnancy and maternity
  • Race
  • Religion or belief 
  • Sex 
  • Sexual orientation 

As a responsible employer, you should ensure questions are phrased in a way that offers every candidate a fair and equal chance to reply in accordance with your job requirements at all stages of the hiring process.

Financial risk

The cost of hiring the wrong candidate is high and can include the expense to interview, training and onboard a replacement, termination fees, unemployment benefits, and potential legal fees if the employee tries to claim wrongful dismissal. It can also result in disruption to the business that affects revenue and/or profitability. 

Reputational risks

In today's transparent environment, job searchers, customers and investors have access to information around-the-clock. A disgruntled employee can quickly share online privileged information or what isn't working at your business. potentially causing damage to the company’s brand and reputation. If you've been in the unfortunate position of making a poor hiring decision, also consider keeping a  close eye on the rest of your workforce and their morale, as they may have been picking up the slack, leading to further unrest. 

Identifying and assessing Risk

An analysis of the risks that workers pose to the organization is a main goal of a HR risk assessment. It entails putting controls in place to minimize the risks associated with employee conduct, as well as abiding by employment laws regarding recruiting and firing decisions, workplace conduct, and working conditions. The objective of the HR risk assessment is to assist organizations in determining if their HR policies and practices adhere to best practices to the benefit of the organization.  Additionally, the goal is to set up a strategy in case risks are discovered in order to quickly limit their impact. Below are some suggestions that may form a part of your risk mitigation strategy: 

1. Use an applicant tracking system (ATS)

An applicant tracking system (ATS) will streamline the hiring process and help ensure consistency in the information provided by job applicants. Most applicant tracking systems include the ability to customize pre-screening questions that, when placed right into job advertisements, can help filter unqualified applicants in an unbiased manner. Integrating the ATS with the platform of a background screening provider helps reduce the risk of candidate fraud by pre-populating information provided by the candidate during the application process.

2. Conduct background checks

Pre-employment background checks should be used by all organizations as another way to weed out prospective high-risk candidates. By using the services of a qualified background screening provider, employers can be assured that the check is free of bias, and is appropriate to the industry in which the company operates and the role the candidate will fill. The hiring organization can address any discrepancies or red flags that are raised during the process with  the applicant to clarify the situation. Although in extreme cases this could compromise a position, the output from the background check can provide the information to disqualify someone from the onboarding process. 

3. Perform behavioral assessments

Aptitude, personality and behavioral assessment tests used during the recruiting process can help minimize misalignment of candidates with roles. Assessments should be geared specifically to the company and the role being filled. Robust testing provides a more holistic view of the candidate and how they will perform in the position and fit into the company culture.

Managing and mitigating hiring risks

A bad hire can expose your organization to a plethora of risks that can negatively affect  revenue, reputation, and finances. The company can be held liable if  the actions of an employee, during the course of their work, causes injury to another employee, client, vendor or a member of the public. Your business will also suffer if an employee steals intellectual property or resources, commits fraud, embezzles money, poaches clients or causees physical damage. Managing and mitigating the various risks associated with hiring is essential. Below are some tips and tricks on how to effectively manage and mitigate risks in hiring.

1. Implement an effective interview process

Give applicants a thorough job description that details not just the duties of the position but also the skills sets needed to be successful and the objectives to be met. During the interview, it may be helpful to have the hiring manager explain why the position is open and what they are looking for in a candidate. Create a strategy for your interview that enables you to fully examine the candidate's capacity to attain the desired results in your specific environment.

2. Perform robust background checks

Any business's success depends on its employees, but those employees also pose one the company’s largest risks. It is rare that applicants for any position would divulge dishonorable portions of their background. Others may omit key details of their past, exaggerate their skills or falsify their credentials. Failure to conduct comprehensive background screening based on the role each individual will hold can open the business to the potential of criminal activity, reputational harm, loss of accreditation or monetary loss. Risks in other parts of your organization can be significantly reduced by managing risk at the point of hiring.

3. Make sure to implement probation periods

Probation periods are a crucial element in reducing the risk of a bad hire. During the probationary period, both sides may assess whether there is a good fit between the candidate, the role, and the hiring company. The employer is also able to evaluate the performance of the employee to determine whether there is potential for a long-term relationship beyond this point. Probationary terms should be included in employment contracts with the duration specified. Should the employer feel that they hired the wrong individual for the job, they can then come to a mutual agreement on termination within the trial term. Before selecting the next applicant, the cause of the previous recruiting error should be determined - to learn and avoid repetition in future. 

Role of technology in mitigating risk

Managing the full cycle of recruiting requires significant time and resources. Conducting background checks manually in-house, especially for companies hiring for a significant number of roles, can put a strain on the human resources function. Organizations can drastically cut the turnaround time background checks by partnering with a trusted vendor like Veremark. When employment screening is done manually, there is the potential for important data to be missed or entered incorrectly. Results provided by a verified screening partner utilizing an automated platform will typically be more complete, consistent, compliant, accurate and unbiased than those that are obtained through manual processes. This advantage is multiplied when the automated processes are backed by the collective wisdom of a team of knowledgeable background screening experts. 

False credentials, careless hiring, and employee turnover are just a few of the hiring risks faced by organizations when hiring and onboarding new employees. Many organizations choose to engage a pre-employment screening service to mitigate these hiring risks. At Veremark, you can improve hiring outcomes and provide a best-in-class candidate experience by leveraging our fast, easy and secure solutions to screen existing or prospective employees - speak to our sales team today!

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