Extra Edition / Business Management

Best Practices in Hiring: Reducing Turnover and Limiting Liability

By Putting a Little Effort into Finding Quality Employees, Employers Can Reduce Turnover

Richard Alaniz
Richard D. Alaniz

It may seem counterintuitive, but it is during the worst economic times that finding and retaining quality employees is the hardest. There are several reasons for this, but the most candid is simply that good employees aren’t the employees laid off first. In addition, most people are less likely to take a risk and seek a new job when the economy is struggling.

Finding good employees is a key step in retaining employees and thus reducing turnover. Large companies across the country have been revising and, in some cases, even validating their hiring practices in order to better do just that. It has the added benefit of also lowering liability exposure for failure to hire claims. Although smaller employers may not have the resources available to professionally validate their hiring process, as recommended under the Equal Employment Opportunity Commission’s (EEOC) Uniform Guidelines, there are a number of steps employers can take to help improve their hiring procedures.

What is a Validated Hiring Process?

A validated selection process is a process that has been professionally analyzed by industrial and organizational (I-O) psychologists or similar professionals and designed to identify those attributes in applicants that are job-related and essential for successful employment. While in traditional validation, all the steps would be performed by outside I-O psychologists, who would ultimately prepare a technical report on the process, your company can perform some of these same steps in-house and hopefully improve your hiring.

Often, companies’ employee selection processes follow one of two scenarios. First, the company may have no formal hiring process and likely has not formulated any real thoughts on the specific skills or attributes needed in a successful candidate. This is often the situation at smaller companies, where the owner, the managing supervisor, or the sole human resources person is often the only interviewer of all the candidates. Or, the company may have a more detailed interview and selection process, where applicants are interviewed by a number of different individuals. However, in both situations, if the selection process utilized does not identify candidates with the particular and unique skills necessary for the specific job being filled, the benefits of hiring in a manner consistent with a validated selection process are not realized.

A fundamental first step is therefore to determine the specific attributes of the position. This can be accomplished by interviewing employees and supervisors, to determine what knowledge, skills, and abilities are required for the job. For example, employers can assemble a group of subject matter experts — supervisors and employees with experience performing, and knowledge of, the job — and have those experts formulate a list of attributes and skills necessary for the job. Employers can then base interview questions and qualifications off of those skills and attributes.

Problems Caused by Employee Turnover

Employee turnover, especially in certain industries, has always been a problem. Too often, revolving workforces lead to increased training costs, inconsistent productivity, poor morale, and, consequently, reduced or limited profits. According to the Society for Human Resource Management (SHRM), employers should focus on turnover for three important reasons:

1. Cost Implications. Replacing workers can be expensive. While the cost varies, some studies have shown the cost to replace and hire new staff as high as 60 percent of the old employee’s salary. In addition, total costs of replacement, including training and lost production, can range from 90 percent to 200 percent of an employee’s annual salary. Although this is less true for positions with more manual labor, lost production and increased costs are still a reality.

2. Overall Business Performance. In addition, oftentimes the employees who remain with a company are less productive and less efficient than they would have been in a lower turnover environment. This is because they must absorb the responsibilities of the vacant positions, train new employees upon their arrival, and deal with a depressed work culture and environment. As a result, companies with lower retention rates and high turnover are often less competitive and produce less than companies with a stable workforce.

3. Turnover Can Be Difficult to Control. And finally, national studies consistently show that employees quit jobs more often because of workplace culture or inter-employee relations than because of the difficulty of the work. A culture of high turnover feeds off of itself, leading to lower and lower retention rates. It can be hard to manage a workforce that is constantly in flux, oftentimes leaving companies in a tough position to compete.

In addition to the benefits associated with a stable workforce, employers may be exposing themselves to additional legal liability when hiring new employees. This is because there are a number of laws that employers can run afoul of during the hiring process.

The Legal Exposure of an Inefficient Hiring Process

As everyone knows, it is illegal to discriminate against job applicants on the basis of protected characteristics, such as race, color, age, sex, national origin, disability, or religion, among others. In general, these laws are enforced by the EEOC, which is tasked with investigating complaints, and has the power to bring lawsuits against employers.

The EEOC has stressed that it believes discrimination in hiring continues to be a problem in many workplaces. Additionally, in its Strategic Enforcement Plan for the Years 2013-2016, the EEOC has made clear that eliminating barriers in recruitment and hiring is one of its biggest concerns.

Discrimination claims fall under one of two types: disparate treatment or disparate impact. Disparate treatment is outright discrimination, or treating someone differently based on a protected classification. Disparate impact, however, involves practices that appear unbiased, but yield a discriminatory result, e.g., requiring a high school diploma for a production line worker might eliminate more minority workers. If the requirement is not related to job performance, the company may face a disparate impact claim.

By putting a little effort into finding quality employees, employers can reduce turnover, increase productivity, and limit their liability — all at the same time. This requires reviewing and, if necessary, revising your interview and hiring procedures.

Tips for Helping to Ensure Reliable Hiring Results

For a selection process to be effective, it must consistently identify the candidates with the skills and attributes that are critical for the job at issue. Asking the right questions in a job interview can go a long way in achieving this goal. Following are seven areas where a company can easily help improve the outcome of their interview process:

1. Ask Consistent Questions of Each Candidate. Ask each candidate the same basic questions derived from the analysis of the skills, knowledge, and ability needed in the job.

2. Use Simple Rating Scales. The more complicated the rating scale, the more likely it is be unreliable. Consider rating answers to each interview question on a scale of 1 – 3 or 1 – 5. Be clear in how the rating scale is supposed to apply.

3. Know the Purpose of Each Question. Each question should have a purpose and be tied to a specific job skill or attribute of the job. If it is difficult to articulate why a question is included, or what a good response to that question would be, don’t use the question.

4. Ensure All Interviewers Are Trained. It is extremely important that all interviewers know the criteria and attributes being looked for. Provide each interviewer with proper interview training, and provide each interviewer with clear guidelines for scoring answers. Instruct candidates to break down subjective ratings into objective components (e.g., don’t write “would make a good ________”; instead, write “has experience doing _________”).

5. Use Panel Interviews. Having multiple people interview a potential employee at once provides a number of benefits. Using panel interviews provides multiple perspectives to the candidate’s answers to specific questions. In addition, it forces individual interviewers to defend the logic of their questions and conclusions. Finally, it discourages inappropriate questions from being asked. All interviewers should score the candidates answers to each question prior to discussing the candidates among themselves.

6. Pay Close Attention to the Candidate. Effective interviewing requires concentration and good listening skills. Instruct interviewers to encourage the candidate to speak by being attentive and maintaining concentration. This also helps make sure that interviewers do not miss relevant answers.

7. Avoid Math Errors. This may seem common-sense, but make sure that the math is done correctly when tallying up the scores. Checking computations twice can help avoid errors.

Finding good employees is the most important step in retaining employees and reducing costly turnover. Although smaller employers may not have the resources available to perform a professional validation of their hiring process, there are a number of steps employers can take to improve their hiring and thus limit turnover and liability — at the same time. By reviewing their hiring process and following the tips laid out, employers will place themselves in a better position to identify, acquire, and retain quality employees.

Publication date: 2/17/2014

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