When my clients express concern about hiring risk, they’re often focused on legal defensibility. I agree this must be a key consideration.
But there is so much more to hiring risk than avoiding legal challenges.
A poor hiring decision can create a ripple effect throughout an entire organization. To fully understand the impact of hiring decisions, we need to broaden our definition of risk beyond legal defensibility.
Here’s where I would start.
The Risk of a Poor Hire
The consequences of a hiring mistake extend beyond the individual. It may take the employee longer to become productive, placing additional demands on colleagues and disrupting team performance.
For financial organizations, the impact can be even greater. A hiring mismatch can affect the customer or member experience, transaction accuracy, adherence to procedures, and the quality of day-to-day decisions.
As these challenges accumulate, service levels may decline, colleagues must absorb additional work, and overall organizational performance can suffer.
A poor hiring decision can also contribute to turnover and ongoing organizational churn. Over time, turnover can become an accepted way of doing business. Organizations can find themselves caught in a revolving door, continually replacing people without addressing the underlying hiring problem.
The financial impact can be significant, too. The ABA Banking Journal reports, “Some 41% of companies surveyed say that a bad hire in the last year has cost them at least $25,000. And 25% say that a bad hire in the last year has cost them at least $50,000.”
But the organization isn’t the only one at risk. A poor hiring decision can have consequences for the new employee as well. When candidates lack the skills, abilities, or aptitudes needed to succeed in the role, they’re likely to struggle on the job. The problem often begins even earlier. Assessing candidates on factors that aren’t clearly related to the job, or failing to provide a realistic preview of what the work entails, does them a disservice.
I’ve heard surprising stories about call center representatives who didn’t realize how much of their job involved being on the phone, and new collection agents who weren’t prepared for confrontational interactions. It’s important to help candidates identify these mismatches early – before they accept a job that’s not right for them.
Job-relevant screening tools help organizations identify the right talent early while helping candidates build realistic expectations about the work.
The Risk of Alienating Candidates Who Are Potential Customers
Your hiring process is a direct reflection of your organization. And hiring is personal.
Candidates should have an opportunity to demonstrate what they can do, understand where they stand in the process, and receive basic information about why they were or weren’t selected.
Ghosting candidates is particularly damaging because candidates may also be current or potential customers.
I was once a loyal customer of a grocery store until the store ghosted my son after he applied for a summer job. Guess what? We found a new store.
For banks and credit unions, where trust and long-term relationships are central, the candidate experience deserves particular attention.
Every candidate should be treated like a valued customer. Even when you don’t hire someone, you can explain the skills and capabilities you’re seeking, encourage continued development, and leave the door open for future opportunities.
A respectful, transparent hiring process helps protect customer relationships, even when the candidate doesn’t get the job.
The Risk of Eliminating Potential Superstars
Resumes, prior experience, and educational requirements aren’t guarantees of job success. Overreliance on these factors can also eliminate strong candidates who have the ability to perform – and sometimes excel – in a role.
Instead of relying exclusively on credentials and experience, give candidates an opportunity to demonstrate the skills and abilities the job requires. Teller candidates, for example, could demonstrate their cash-handling accuracy and customer service skills, while potential contact center agents could respond to simulated customer calls. A realistic, job-related assessment, such as a job simulation, can help identify candidates who can actually perform the work.
Don’t confuse a candidate’s credentials with their potential. You may be screening out your next star performer before they ever get the chance to shine.
The Risk of Overemphasizing Fit and Culture
There’s a popular adage, Hire for Attitude, Train for Skills. This school of thought proposes that you select candidates based on attitude, fit, and culture – then address potential skill and ability gaps in training. But does that work?
When I ask employers what “fit and culture” really means, I often hear the same thing: “We need self-starters with a strong work ethic who are team players.” Yet without specific criteria, it can sound more like a motivational poster than a hiring strategy.
More importantly, when I ask how they plan to measure attitude, fit, and culture, there’s rarely a solid answer.
Some measures of fit that focus on legitimate job requirements and work preferences can be useful. But too many lack a clear connection to job performance. And even if you could accurately measure culture fit, would you really want a workforce made up of people who all think and behave the same way? Diversity of thought often drives innovation, problem solving, and organizational growth.
The goal isn’t to ignore attitude or workplace culture. It’s to avoid letting vague, subjective notions of fit outweigh the skills, abilities, and behaviors that truly predict success.
In his frequently cited article, Why Hiring for Attitude Doesn’t Work, Employment Technologies founder and president, Joseph Sefcik, states:
“The Hire for Attitude theory doesn’t hold up in practice. In fact, when it comes to predicting job performance and success, empirical evidence consistently suggests the opposite: Hiring for Skills dramatically increases your accuracy in selecting the right people.”
Prioritize job-related criteria over vague impressions, and base decisions on objective evidence of demonstrated performance.
Redefining Risk
Legal defensibility matters. But hiring risk extends far beyond the possibility of legal challenges. It includes poor performance, unnecessary turnover, frustrated employees, alienated customers, and overlooking candidates who could become your next superstars.
So, as you evaluate your hiring process, ask:
- Are we measuring the capabilities people actually need to succeed in each role?
- Are we screening out qualified candidates because of unnecessary experience or education requirements?
- Are we giving candidates a realistic understanding of the job?
- Are we evaluating candidates consistently against job-related criteria?
If you can’t confidently answer these questions, it may be time to rethink how you define – and manage – hiring risk.
The best way to reduce these risks is to focus on what matters most: the skills, abilities, and behaviors required to perform the job successfully. Put candidates in realistic, job-related situations and give them the opportunity to demonstrate what they can do.
This means looking beyond whether a hiring decision can be defended and asking a more fundamental question:
Does our hiring process help us identify the people most likely to succeed?
That’s not just good assessment practice. It’s a better definition of risk management.
RETHINK ASSUMPTIONS. STRENGTHEN RESULTS.
Explore these resources to discover new ways to make more effective, evidence-based hiring decisions and build stronger teams.
WHY HIRING FOR ATTITUDE DOESN’T WORK
PERFORMANCE-BASED HIRING: FROM ASSUMPTIONS TO EVIDENCE
IT’S PERSONAL: WHY ASSESSMENTS ARE THE FOUNDATION OF EFFECTIVE TALENT DEVELOPMENT