How Candidate Abuse Is Costing Your Firm Millions of Dollars in Revenue
A reporter from the Wall Street Journal once asked me what I thought was the greatest secret in recruiting. Such a broad question would usually cause one to ponder, but my immediate response was that abusive hiring processes cost organizations millions of dollars by turning possible customers into lifelong "haters."
For decades it has been accepted that god-awful treatment of candidates is normal, and that since it is widespread, it's OK. How anyone in recruiting cannot connect that a poor candidate experience is similar to a poor customer experience and assume that there is a significant negative impact is disturbing. Anyone with a basic knowledge of customer relationship management knows that there is a well-documented correlation between customer satisfaction (with their treatment and the products purchased) and customer retention, i.e., their willingness to buy from the organization again.
Organizations like the Ritz-Carlton and Wal-Mart have elevated monitoring guest satisfaction to a science and know the exact dollar cost of obtaining a customer, upsetting a customer, and losing a lifelong customer. While such evaluation is common in sales and customer support functions, it is nearly unheard of in HR functions, which often interact with a significant volume of potential customers in any given year. The impact of a poor "candidate experience" is uncalculated, unreported, and not discussed, making it quite possibly one of the largest "hidden costs" facing modern organizations.
The Current Process is Abusive
Given that median job tenure is approximately 3.9 years, it's highly probable that the vast majority of you reading this article suffered through an interview process in recent years or have a close friend or family member that did. As professionals in recruiting, we know the process can be painful; the volume of evidence indicating so is overwhelming. Staffing.org has for many years reported that more than 70% of applicants find the process distasteful. In most organizations, little or no thought has been given to how the candidate experiences the process. Instead, the design is solely based on administrative need. Many organizations treat candidates more like prisoners or detainees than customers.
Applicants voluntarily come to your company wanting to help. They spend dozens of unpaid hours preparing for your process. Many of them may in fact be paying customers. Unfortunately they are all too frequently met with web pages that offer up generic content and are black holes when it comes to advancing their objectives. If they advance, candidates will also likely undergo a painful drawn-out application process, interviews scheduled at the most inconvenient times, and ultimately they are dropped from consideration with little or no honest feedback about why.
I estimate that the average professional candidate voluntarily spends more than $1,000 worth of their own time and money in preparing for and participating in an organization's hiring process. Given that level of investment, they deserve to be treated like good customers.
You might be harboring thoughts that your organization doesn't sell to the public. Therefore your organization is exempt from the hidden costs of candidate abuse. But you would be wrong. The potential impact in B2B organizations is even larger than B2C organizations because the average transaction value is much larger. While applicants may not make purchasing decisions, they certainly can influence them.
Assessing the Hiring Process Using a Standard Customer Service Template
There are dozens of easy to identify faults associated with most hiring processes. As a customer of products and services yourself, finding them shouldn't be that hard, particularly if you involve a diverse group of reviewers, since your perception may not trigger all of them. Some of the major faults that would never be tolerated in a customer service process include:
If you are going to estimate the dollar loss in revenue resulting from a poor candidate experience, don't do it on your own. Form a cross-functional team involving representatives from finance, customer service, marketing, cost accounting, and risk assessment. Use the following list of potential impacts I have observed as a starting point.
Remember that being treated poorly during the hiring process, which often ends up in being rejected, will not result in a mild disappointment, but rather unhappiness bordering on anger. Individuals who once championed your organization will likely become activists against your organization for at least two years and maybe a lifetime. (Note: the estimated potential losses are general benchmarks, based on my experience. The actual numbers need to be calculated at individual organizations.)
Direct Sales Impacts
Lost sales to the public.
Current customers who are treated poorly will probably never buy your product again. In the future, unhappy applicants will likely remember and avoid your products and services for years. They will also likely tell family and friends (social networks) about their negative experience and encourage them to avoid your products also. If you can correlate your customer list with your applicant list, you can gauge the potential impact. (Estimated potential loss, 1% of sales.)
Weakened product brand image.
If your company's brand image and/or its corporate values espouse courtesy, responsiveness, transparency, or honesty, it will be quickly tarnished if applicants experience something completely different. With the advance of social networks and rating sites like Glassdoor.com, candidate perceptions about dishonesty in your positioning can spread quickly. (Estimated potential loss, .002% of sales.)
Lost B2B sales.
Your decreased employer brand image may cause some B2B customers to shop elsewhere. In addition, some of the individuals who you anger and don't hire will get a job within your industry or region. Some of them will immediately or eventually be in a position of power where they can decide to buy products and services. Just like corporate alumni who fondly remember your firm, they can influence business-to-business sales. A percentage of those individuals will unfortunately negatively remember how you treated them, and that will influence their decision to become a supplier to your firm or to purchase products and services from your firm. (Estimated potential loss, .001% of sales.)
Future Recruiting and Retention Impacts
Higher offer rejection rates.
Because the #1 reason why people turn down job offers is the way that they were treated during the hiring process, your firm will lose some high-quality hires. This will delay the filling of positions or it will result in having to accept second-level candidates. (Estimated potential loss, 15% higher offer rejection rate.)
Employer brand image damage.
It has become a reality that "others" now own your employer brand image. If you treat candidates poorly, they can now easily and rapidly spread rumors, stories, and recommendations against working at your firm to complete strangers on social networks. Not only will your positive employer brand image deteriorate, but you may also develop a separate and more harmful "negative brand image." Expect applications of all kinds to drop off and a significantly higher candidate loss rate among the so called "passives" who already have a job. (Estimated potential loss, a 20% reduction in applicant volume, quality, new-hire quality, and new-hire productivity.)
Reduced employee referrals.
The most powerful of all recruiting tools will likely decrease by as much as a third as employees hear how the highly regarded colleagues that they refer are treated. (Estimated potential loss, 33% of current employee referrals.)
Top performer mid-process dropouts.
The slow and unfriendly hiring process will have its greatest impact on those who are highest in demand, including top performers, innovators, and game-changers. They will judge the firm's overall innovativeness by the innovation they find in the hiring process. Even if they start the process, these individuals are the ones who are most likely to drop out immediately after they learn through experience that everyone undergoes the same hiring process throughout the organization and that their hiring process was not specifically designed for the unique needs of top performers and innovators. (Estimated potential loss, 40% of top performer applicants will not finish the process.)
A loss of return candidates.
Finalists who would have been hired if a super-strong candidate wasn't in the final candidate mix the first time will likely never reapply. "Soon to be qualified" candidates who were rejected merely because they did not have quite enough experience will certainly not reapply later. (Estimated potential loss, 50% of the total candidates who would have reapplied.)
Higher website drop rates.
Your careers webpage and its application process are part of the candidate experience, so if it's slow and tedious, it must be included in the overall assessment of how weak your candidate experience is. However, if the word spreads that the rest of your candidate experience (after the application is completed) is even more painful, this will result in fewer webpage visits and more "abandoned" applications. (Estimated potential loss, 15% of the total candidates who would have completed an application.)
Loss of a competitive advantage.
Because top candidates have multiple job choices, they likely will not consider an abusive process and they are always among the first to drop out of a simply candidate-unfriendly process. Losing top candidates not only affects your firm's future productivity and increased innovation, but it may also boost it across the street at your competitor, if they end up accepting a job there. (Estimated potential loss, .005% of sales.)