Hiring is always a tricky process: you want to shorten the hiring process but to find the right employee, you need to spend more time in it. With the advent of technology and remote teams, the hiring dimension has shifted drastically—the fundamentals still remain the same. Without properly managing the process, hiring can become a frustrating, time-consuming and even costly one.
As such, companies are often calculating the costs that go into hiring.
Recruiter fees, advertisements, and promotions are all example of costs. Opportunity costs and lowered productivity (when the team leaders are taken out of their posts to interview and evaluated candidates) are also factored in as hidden costs.
The total cost varies depending on how you calculate it. An article by Joe Hadzima, a Senior Lecturer at the MIT Sloan School of Management, said that it typically costs 1.25 to 1.4 times more than the base salary. A study by the National Association of Colleges and Employers calculated that an employee takes USD$7,645 to hire.
If you’re hiring because someone left the company and you need a direct replacement, turnover costs can go up to 33% of a worker’s annual salary.
Yet, companies widely believe that it is elusive: until you look at the way they hire.
With the high direct and indirect costs, it is a small wonder why businesses are always looking at hiring the right employees. To hire those kind of employees, employers need to start looking at how they can build the right hiring experience.
If you’re in HR, you’re a designer by default.
2020 is the era of employee experience—it signaled the change of the candidates’ mindsets and objectives. Companies need to think of themselves as designers so that they can carve out the best employee experience possible.
Candidates today are placing a stronger emphasis on culture. A study by Jobvite discovered that half of the candidates believe culture is extremely important in choosing a company. In 2017, a survey conducted by Hays found that 71% of employees are willing to earn a little less just so they can have the right company culture.
While the meat of a job like remuneration, benefits, and perks are all critical points for companies to consider, the intangible things like culture and beliefs are gradually getting their spotlight. For instance, candidates are using Glassdoor to know more about the company’s culture before they even apply for the job.
Rather than employers running a background check on their candidates, it’s now the other way around.
The employee experience can become extremely complex: IBM famously created a philosophy around designing the employee experience. Part of this employee experience is hiring:
- What are your processes for the hire? This goes from planning, envisioning to executing and concluding with a hire/adjustment.
- How will your candidates feel before, during and after the hiring process? This goes for both acceptance and rejection. What emotions will they feel about the way the company goes about hiring?
The Grand Canyon between candidates and companies exists when there’s a negative hiring process. This can be exacerbated when companies rely on incompetent hiring managers. In this guide, we go into detail on how companies can design the right hiring experiences, lay the foundations to building a great one, and potentially save costs while landing the best candidates.
Hiring may seem simple but it is only so when there’s thorough planning involved. Depending on context, the level of detail can be different. Regardless, every step in the process is a delicate one and companies need to spend an adequate amount of time preparing it.
The hiring process can be broken down into three steps:
- Planning and envisioning. Takes a moderate amount of time here. Companies need to set their expectations, draw out their processes and execute before even posting the job descriptions.
- Executing the hire. This includes posting about the job, marketing, sourcing, pre-interview, screening, evaluation, and post-interview. It can take anywhere from days to months to shortlist a few candidates.
- Closing the hire. This should be a fast one, although most companies delay at this part. It includes drafting a job offer, making a hiring decision and negotiating remuneration.
Plan and Envision
What should the recruitment process look like? This is where the hiring team will put their heads together and chart this out. From posting the job description to onboarding the candidate, planning their process based on a vision will ensure that they will create a type of hiring experience. Rather than having it go all over the place, companies need to treat every hire for a job as a project. Using a vision can help unite everyone’s goals and thus create consistency.
Weighing Inside Hires vs. Outside Hires
Companies need to do both internal and external hiring, according to Harvard Business School professor Boris Groysberg. He posited that it’s about companies understanding the right type of hire for the current employment condition, not choosing whether you want to do internal or external.
Both have their place and it is important to consider the factors going into determining the type of hire:
- Retaining organizational knowledge. Internal hires retain organizational knowledge when they are promoted to a new role. External hires would have to go through training and adapt to the company over several months.
- Skills can be firm-specific. Late human capital pioneer Gary Becker posited that some skills are specific to the firms they’re working in. An external hire may not be able to replicate the stellar performance they had at their original workplace. Groysberg mentioned an example: many want to hire from Goldman Sachs, but Goldman is a very firm-specific place. Internal hires would have firm-specific skills.
- Existence of transparency and regular performance reviews. Corporate cultures that allow HR to understand who might be the best person in the organization for the role can look at internal hiring. If there’s no clear consensus, then it’s easier to look outside rather than do succession planning.
- Well-planned onboarding processes. If there are comprehensive, detailed processes in place to integrate new employees into their roles, both internal and external hiring is open.
- Budget. Internal hiring will be much cheaper than external hiring since you avoid recruiting and advertisement fees.
- Need for disruption and innovation. Legacy thinking can be a plague for companies needing a turnaround. External candidates with courage can be brought in to disrupt that.
- The time needed for a new employee to integrate. New employees need time to amass social capital, gain technical experience and adapt to the organization culture to perform well. Some companies have unique cultures that can be difficult to adapt to. In times of urgency, you might want to rely on an internal hire instead.
- External macroeconomic conditions. More demand for roles and jobs in a type of industry will affect the type of hire. It can be better to hire externally when there’s higher demand as there will be more candidates to select from.
- Flexibility for remote candidates. The future of work is remote working and this will severely impact hiring processes. Everything will have to be done on video, including working in the future.
Don’t Over Rely on Data and Machine Learning
The job market isn’t the only thing getting competitive: the HR tech market is also blazingly hot. Billions of dollars in venture capital money have been poured into it over the years and the market is expected to grow at a CAGR rate of between 11.0% (according to Grand View Research) to 13.7% (according to Markets and Markets).
With vendors creating software surrounding wellbeing, attendance, engagement and suchlike, the rise of data science eventually got merged with HR tech. Data scientists left and right are building algorithms to predict candidate potential, screen candidates and review them based on tests.
If your company is reliant on evaluating candidates, hiring them and screening them using data science, there are many potential negative consequences to this.
Data often lack context. As humans, we rely on context to interact and survive. For instance, humans cry when we have high emotional levels. If we are grieving, the tears are sad. If it’s about leaving a toxic company, it might be out of relief or happiness. For data, it’s the same.
AI systems has two broad traits they rely on when they make decisions. Accuracy is about how well they can predict a certain outcome. Flexibility is the capability of predicting at a certain level regardless of the circumstances. However, most AI systems are incapable of ‘thinking like humans’—they do not possess the same contextual framework we use in our lives.
It is the reason why Amazon scrapped its AI recruiting tool in 2017 when machine-learning specialists discovered that it was sexist by accident; the algorithm consistently gave lower scores to women. Historically, top performers in Amazon were coincidentally, disproportionately men. As such, the algorithm often sought out people that are just like these people.
Theoretically, you can aggregate data from different companies so you have a huge volume for your algorithm to learn from. However, just like firm-specific skills, data can be highly contextual. Different company contexts can distort their usefulness in relation to other datasets from other companies.
Despite Amazon scrapping their algorithm, many companies are still relying on data science because these algorithms replace human hiring managers. Rather than sit down in front of the computer and screen hundreds of resumes (most of them likely badly designed), they can leave it to an algorithm that has a ‘proven’ framework.
It is cheaper, faster, and they can pick from a pool of ‘better’ candidates.
There is seemingly an infinite number of factors and there is simply not enough data (to be legally acquired) to get—it can get very expensive too.
However, data science has its place. The problem comes when companies use it as a crystal ball rather than as an aid. If you are incorporating data science into hiring and evaluating processes, you will have to keep in mind that margin of errors exist for a reason. The answer to “how good is this candidate” isn’t as easily answerable as something like “when will this engine fail”.
Know Your Costs
Hiring can be costly if it’s not controlled. As mentioned earlier, cost differences between internal and external hiring can be drastic. Besides direct hiring costs, post-hiring and onboarding costs can also add up.
The biggest culprit? Indirect costs in the form of lost productivity and suchlike. It is the reason why you can get absurd numbers of hiring costs, with hiring new employees costing up to tens of thousands.
If you’re hiring an employee that is being paid a $50K annual salary, set a benchmark on how much cost you are willing to bear. For instance, it might be 50% if the company is desperately needing a replacement. It can also be 20% if it’s a slow, steady expansion of the team. A good rule of thumb is to keep it within an affordable range, typically between 16 to 20%.
Hence, before kickstarting any planning process, consider the type of costs that the company will bear and whether the budget allows for that.
- HR salaries. To calculate how much of their salary they are ‘being paid’ for the hire, calculate the amount of hours they take to post a job, review resumes and screen candidates. Take their hourly salary and divide the hours.
- Previous turnover costs. Lost productivity from turnover can become a huge opportunity cost. When a company is short-staffed, the business suffers indirect losses.
- Recruiter commissions and agency fees. For instance, headhunters, RPOs, consultants, recruitment agencies, freelance recruiters and suchlike. On-staff recruiters are also paid commissions.
- Employee referral bonuses. This may be a smaller cost (relative to every other cost in this list) but it can be significant for a larger role. A bonus for a director costs more than a junior project manager.
- Digital and physical advertising costs. Job boards, career fairs, recruitment events, conventions, digital advertisements, and social media recruitment tactics are all examples of such costs.
- SaaS tools. For instance, applicant tracking systems or candidate screening platforms.
- Background check and pre-employment services. These are typically performed by contractors.
- Lost productivity for company staff. When your staff are being pulled elsewhere, the business loses productivity; they could have been doing other work related to their job responsibilities. This is an opportunity cost since there’s less people to do all the work. When employees are elsewhere to hire, train and integrate new staff, the rest of the team that remains will have their hands tied. Lowered morale may be a likely consequence.
- Signing incentives. For instance, paid signing bonuses and relocation expenses.
- Onboarding costs. Training materials and time will have to be given away. Staff will also be pulled away to train them, rather than attending to their individual duties. Regardless of how qualified they are, different cultures can warrant a longer time to integrate, which also means lost productivity for a short period.
Draft Your Team, Set Your Objectives
Pick the people involved in the hiring process. For instance, this can include a manager and an employee in the relevant department. Sometimes, other departments are also pulled in to bring third-party perspectives. With this team, you can create a digital workspace (e.g. Slack channel, Microsoft Teams space) to share information and post any key reference information.
This way, you can also create goals. For instance, you outline milestones or metrics for your new hire. When you establish goals upfront, the entire interview team understands the expectations that you have. You can also understand where the wiggle room is and what you cannot tolerate.
Executing the Hire
Glassdoor discovered that companies that take their time to develop a strong hiring experience got a 70% improvement in the quality of hires. According to Jobvite, with more than 70% of recruiters believing that hiring will become more competitive in the next year, companies have to spend even more time to dissect their ideal candidates and figure out what they can do to attract such a candidate.
Once you get all your foundations sorted out, it’s time to set the stage for hiring. Typically, hiring managers will rush into writing job descriptions and blasting them all over job portals like Monster. Instead, you need to have ample preparation to understand what you’re looking for.
Essentially, you need to reverse-engineer. What must you present and prepare to get the ideal candidate?
Understand the Job Markets
Not all jobs are made equal—the same applies to companies. Besides remuneration, commute distance and employee benefits, there’s a difference between working in Apple and Aramco. Before you dive into the job description, you have to understand the limiting factors that can affect your strength in the war for talent.
- Company reputation matters. While the effect may not be one size fits all, a calculation by Linked Talent Solutions based on Bureau of Labor Statistics data found that bad reputation raises the cost of hiring by at least 10%. This is coupled with the fact that strong employer branding reduces recruitment costs by at least 43%. Having a strong employer brand that speaks to a certain demographic will help attract the right demographic and pool of people.
- Competition for talents. Which companies in the market are offering similar jobs? Companies that enjoy a stronger brand and better standing would undoubtedly attract more candidates with the same job offer. This will mean adjusting compensation, benefits, job requirements and other opportunities.
- Company mission. Deloitte’s survey on millennials found that 83% of millennials and 80% of Gen Z believe business success goes beyond making a profit. This means most job-seekers are conscious of where they are putting their effort in, which can be a deciding factor between two companies offering similar paygrades.
- Workplace culture. How important is the workplace culture? It’s enough for 71% of employees willing to take a pay cut to work in the right culture, according to a Hay’s survey. Companies who fail to build a strong foundation for organizational culture and align it after will result in poor employer branding. Typically, that means lower Glassdoor ratings, diminishing employer reputation, and low-quality candidate pools.
Writing the Job Description and Requirements
The last thing you want your employee to say after being hired is “wait, this isn’t what I signed up for”.
An HRDive report revealed that 73% of hiring managers say they provide clear job descriptions. Unfortunately, only 36% of candidates agree. Skip the lofty buzzwords, yogababble, and other cool-sounding words; your job description should be accurately describing core and potential responsibilities. No one deserves fluff and candidates who find companies being authentic to them are more likely to stick around.
- What are the must-have qualities and good-to-haves? Without understanding the context of the team, recruiters and hiring managers can potentially turn away good candidates simply because they are not flexible enough. It’s not their fault: they don’t have the knowledge to make a call on whether a candidate fits or not. Hence, you will have to work with your HR department to go through the list of must-haves and nice-to-haves. Assign priority to each so that they can understand what to look out for.
- Show the reality. Good stuff (like flexibility) and bad stuff (like late hours) are all things you should be putting in the job description. Don’t hide the bad things just so the company looks ‘beautiful’. Employees who find the job not aligning with their expectations will eventually become disengaged. That can lead to them leaving the company.
- Be specific but flexible in your job description. Candidates hate vague job descriptions. According to Jobvite, 45% of employees who leave their job within the first three months attribute it to the actual job betraying their expectations. Give employees an idea of how they fit into the bigger picture and what the company expects them to do. If their roles may change over time, set the expectations for them and inform them about it.
- Be clear on the technical details. Is the job contract-based, temporary or permanent? When does the employee start? What are the employee benefits? What is the salary? How many rounds of interviews are there?
- Be truthful about what can be negotiable. Companies often hide the remuneration amount in the job description in an attempt to hire those that are truly willing to work with the company. However, candidates should be informed about the potential remuneration and whether that is negotiable. Other things like remote working, flexible hours and workplace benefits can also be considered as well.
- Design realistic requirements. We all have our wish lists but that does not mean we can always fulfill them. What are some of the requirements that demand a binary decision (i.e. yes/no) and some that can be negotiated? If you rely on algorithms to screen resumes, always ensure that a human screens them at the end to look at resumes that may not fulfill the requirements in case they are still viable hires.
Marketing and Sourcing for Candidates
There are many ways for companies to find candidates. With the advent of job boards, apps, and other programs, companies can easily source for candidates.
- Be proactive in sourcing. Don’t expect candidates to be given to you on a silver platter. Use as many resources as you can and reach out to talents that may not have seen the job advertisement.
- Use your own resources. Do post your job advertisement on your company website. If you have an internal website, you can also send your job advertisement there.
- Use free job posting sites. Although job search engines like Indeed scour the net for job postings, you can also use general-purpose job boards like Recruiter and Jobspider.
- If your job is specialized, post it in the relevant space. Give your job advertisement more visibility by posting them on the right websites. For instance, remote job boards and startup job boards.
- Consider social media networks. LinkedIn isn’t the only place to post job openings. You can also post it on Twitter as a tweet with the hashtags “#hiring”. Other social media accounts like Facebook’s business Pages and Instagram can also do well. You can also run promotions on popular pages like Hacker News, Nextdoor and Reddit.
- Look for passive candidates. There are employed candidates that are receptive to recruiter outreach. They may not be actively looking for work, but they are open to new opportunities. Some of the places you can look for can be portfolio sites like Dribbble, social media, and personal blogs like Medium.
- Use an employee referral program. Incentivize your employees to refer someone they know for the job. There is no one-size-fits-all incentive: tailor the rewards based on company culture, budget, compensation philosophy and the influence your company. To help make it scalable, you can also create an employee referral process to reduce friction and ensure the right referrals come to you.
- Consider running a campaign. Singapore-based startup Shopee has a #lifeatshopee. IBM used to have a #lifeatibm campaign. These provide better insight as to what your candidates can potentially experience in the company, rather than blandly talk about what they will do.
Screening Resumes and Shortlisting Candidates
Hiring can be needlessly labor-intensive without a resume screening process. Hundreds of promising candidates can apply for one job and although hiring managers should be reviewing every resume, having a structured screening process and make it much faster.
With a screening process, the HR team can find and focus on the best-fit candidates while reducing unconscious bias. The process also creates something tangible to review in the future so as to adjust to your own recruiting ethos.
- Do they meet the minimum qualifications? This is the easy part. Generally, they are basic, certifiable and typically non-negotiable qualifications for a candidate to be even considered for the role. For instance, they can be academic qualifications, professional accreditations and years of experience.
- Do they meet the preferred qualifications? This contains the nonmandatory skills but with them, they form the ideal candidate. Less black-and-white than minimum qualifications, they aren’t necessarily deal-breakers. However, they can help you identify the top-fit candidates. Such qualifications can include things like ‘experience in video production preferred’, ‘proficiency in HMTL5’ and so on.
- Do they give off the right general impressions? An additional qualitative review can add useful context. For instance, you can look at how well-designed is their resume. If the candidate made quantifiable impact (e.g. increased CTR by 25%), it can also be factors for shortlisting.
- Are you using an applicant tracking system? Such systems use resume parsing to help you identify keywords using filters. For instance, to save time, the system gives you resumes of developers that indicated “SQL”. While the process is faster than conventional screening, keep in mind that this resume parsing can be accidentally biased. Candidates can use keyword stuffing to game the system, while others may not structure their resume the “right” way to pass the system’s filter.
Interviewing the Candidates
Jobvite found that almost half of job seekers found an in-person interview the most impactful on their impression of the job and employer. However, remote working is gradually taking over. Companies like Reedsy and Auth0 are fully remote. Some companies are also comprised of in-office and remote teams. Depending on where the candidates are, you might not be able to do in-person interviews all the time.
Regardless, there’s no excuse to not design a great employee experience.
- Make it easier to schedule interviews. It’s a pain to go back and forth on email especially when work email inboxes are always flooded. Use tools like Calendly or x.ai to help with the scheduling.
- Consider video interviews. Video interviews using tools like Zoom, Skype or Hangouts are great alternatives.
- Plan your interview questions and techniques. Are you looking to have a conversation? Are you doing a case discussion? Have a list of questions related to the job description prepared, varying them with close-ended, open-ended behavioral and hypothetical questions.
- Tailor questions to the candidate’s resume. Don’t use a single set of questions and apply them to all candidates. Using tailored questions can help discover more about a candidate’s unique characteristics and skills. For instance, if a candidate ran a dropshipping website before, you can ask about the marketing skills he learned from it.
- Give feedback if there are multiple rounds. This is to avoid the candidate from repeating himself in the next round, which can give the impression that the company isn’t organized in their interview process.
- Take notes during the interview. You might form incorrect judgments based on memory. Take notes to avoid relying on general impressions.
- Know what interview questions go into which rounds. The first round of interview is typically meant for factual-based understanding (e.g. getting to know the candidate and his skillsets). The second and third round of the interview is more on whether the candidate can demonstrate his ability to do the job.
- Use a framework for the interview. Tell the candidates how the interview is going to proceed. For instance, it can be a conversation and then a topic discussed later. This eliminates surprises, which might throw a candidate off track.
Evaluating the Candidates
With your notes and impression of the candidates, you can now evaluate them. Companies often come up with tests to do their screening. For instance, BCG and McKinsey use case interviews to hire consultants. Most tech jobs also use technical interviews to test coding proficiency.
To evaluate fairly and objectively, set up a framework that scores the candidate relative to others. You can look at your top-performers can use them as benchmarks, so that you can determine how close these candidates are to them. It is important to have an evaluation criteria so that you can look back and review for the next hire.
For large companies, the evaluation can be done by the team involved in the hire. Using the rubric, you can give your recommendation to the HR, who will make the final hiring decision.
Closing the Hire
Being in the dark is one of the worst parts of a job hunt. Rather than leave them guessing when they will get hired or rejected, having a structured closing process will boost the hiring experience as well. Even if candidates are rejected, a positive hiring experience can help with future re-applications and boosting company reputation when they talk about your company.
Settle Your Rejections First
Sometimes, you will have a pool of top-quality candidates. However, you are only looking to hire one person, which means you have to reject the rest. It is human to want to keep everyone on hand first, settle remuneration benefits then pick the one that’s the best for your company.
Besides ruining the hiring experience, you are also unfairly leaving candidates in the dark. Instead, you need to settle on one candidate and quickly close the hire.
Close the Hire Fast
Even startups are culprits in moving slowly with their hiring decision. When companies delay their offer, they risk the chance of having a keenly sought after talent join another company. Companies who move fast also leave a strong, positive impression on the employee.
Prepare for the Bidding War
Sometimes, your candidate may negotiate the compensation package based on his requirements. At times, it might be niche requirements such as remote working for a day per week. Other times, they touch on more sensitive topics such as salary, bonuses, and employee benefits.
High caliber candidates know their worth and they might even get a counteroffer from their current employer (if they’re employed).
Faced with negotiations, you have to consider whether you can match it realistically. That can be a higher salary or a comprehensive insurance package. Your goal is not get caught up in the bidding war; you might win over your talent but you raise the bar to retain him.
Send a Job Offer Letter
Traditionally, companies sent offer letters by snail mail. Today, you can opt for an email. Either way, a job offer letter is important in communication expectations and details of the job. This way, the employee can also have something to refer to when he has questions about his employment package.
To complement the job offer letter, you should call the candidate to give the candidate an opportunity to ask immediate questions.
There are several elements that you need to take note of:
- Congratulate the candidate. Companies can go an extra step with this. For instance, you can get the CEO to draft a little note. You could also send a gift bag.
- Explanation. Give a snapshot of your reasoning as to why you chose the candidate. This is an extra vote of confidence in their abilities.
- Position title and responsibilities. Essentially a copy-paste: reiterate the position title and core responsibilities.
- Employment type, compensation, and pay structure. This is where the legalities come in. Explain to the candidate what is the compensation structure like. For instance, it could be a full-time role with annual salary and additional commissions for sales. Clarify when they will be paid (e.g. biweekly or monthly) and when they will receive bonuses if any.
- Employee benefits. Showcase all the benefits, including insurance coverage, number of annual leave, working flexibility, stock options, etc.
- Start date, schedule, and work location. Indicate where they will be working and when they have to start work. Clarify their working hours as well.
- Manager/Mentor. Who are the mentors assigned to guide and coach your candidate?
- Contingencies. This is to ensure that you can legally hire the candidate. For instance, verification of U.S. employment eligibility.
- Other legalities. This can include other requirements such as non-compete clauses, confidentiality agreements, and reference checks.
- Employment termination terms. The employment relationship must be clearly stated: can the company terminate employment at will, or must they provide a notice period?
- Expiration date. If the job offer expires, set a deadline as to when you want your candidate to respond. Set internal deadlines as well to follow up with the candidate.
Planning and owning your hiring process is a lot of work. However, with more millennials and Gen Z joining the global workforce, the employee experience has never been more focused than today. In 2017, the employee experience was predicted to be the future of work, to which many companies focused on and began designing it with great attention.
Companies like Gallup and IBM are already developing their own philosophy and process behind a compelling employee experience, which will be instrumental in hiring, engaging and retaining high caliber talents over the next several years.
It is time for leaders to take a step back and look at the big picture.
The employee experience isn’t just about employee engagement. Companies need to start off strong and keep the retention efforts going. Like every flourishing business, companies are nothing without their employees. With the job market getting more competitive and employees getting pickier, designing a great hiring experience has become a norm in the war for talents, rather than something to make a company stand out amongst the crowd.