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How Candidate Abuse Is Costing Your Firm Millions of Dollars in Revenue

by
Dr. John Sullivan
Mar 15, 2010, 5:10 am ET

Spring 2010 conference-logoA 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 of family member that did. As professionals in recruiting, we know the process sucks; 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 be 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:

  • Difficulty initiating the process and lack of feedback that the application was successful
  • Ignoring or losing a majority of the applications
  • Long, drawn-out assessment cycles (three months on average)
  • Processes executed for appearances’ sake only, i.e. a selection was made prior to the process even starting
  • Little or no honest feedback throughout the process
  • No easy way to make inquiries, i.e. one-way communications only
  • Inconsistent treatment across jobs and business units

The Top 20 Results of a Poor “Candidate Experience”

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 web page 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).

The loss due to candidates’ word-of-mouth — friends, family, and colleagues of a poorly treated candidate will almost certainly hear of their bad experience. Because of their close relationship, they are even more likely not to apply for position at your firm in deference to their colleague’s negative recommendation (Estimated potential loss, 1% of the total candidates who would have reapplied).

More hiring mistakes — because confused, tired, and frustrated applicants just don’t perform as well during interviews, the hiring decisions will be less accurate because you’re not seeing the “best” performance of the candidate (Estimated potential loss, a 10% increase in the number of top candidates who will be rejected by mistake, because they underperformed during the interview process).

Managers and recruiters will aim lower — because individual hiring managers and recruiters won’t really know that the reason that they are not getting quality candidates is a poorly designed hiring experience, they may jump to conclusions. They might conclude that “there are just no quality candidates out there” or that “there’s something wrong with their jobs or firm.” Both assumptions might cause them to mistakenly recruit and accept lower quality candidates and hires (Estimated potential loss, 10% lower quality candidates are hired).

Decreased retention rates — because your current employees will find themselves working alongside weaker new-hire replacements, they will have less reason to stay. In addition, hearing friends and colleagues badmouth their firm because of its abuses hiring process will also reduce their loyalty. Some new hires may take the job because they need it but decide the minute that they accept that they will continue looking, and leave at the first opportunity. (Estimated potential loss, an increase of 1% in overall turnover rates).

Loss of quality recruiters — recruiters will be frustrated with having to operate under this slow and unresponsive process and the results that it produces. The power of the relationships that your top recruiters built up with candidates will be lost the minute that the candidate experiences the abusive process. Together they will make it more difficult to attract and retain top quality recruiters (Estimated potential loss, 25% of the firm’s top recruiters).

New hires will unfortunately copy — individuals who are hired under the poor candidate experience will unfortunately learn it and use it when they hire individuals. This will result in an even more widespread adoption of the unfriendly process (Estimated potential loss, a 5% reduction in the quality of new hires).

Fewer global hires — a fragmented process may confuse some candidates who are already unfamiliar with Western hiring processes. If the process is weak enough, it may actually insult or offend some candidates from some cultures (Estimated potential loss, 5% of global candidates who would have completed the hiring process).

Loss of career counselor referrals — as career counselors, especially those at universities, get feedback about the negative treatment at your firm, they will spread the word to other counselors and to their clients. This will make it unlikely that they will ever refer future candidates (Estimated potential loss, 35% of the total candidates who career counselors refer.)

Other Potential Costs Associated With the Bad Candidate Experience

Legal issues — having a confusing experience that doesn’t consider individual candidate needs might result in an adverse impact among certain protected groups. In addition, merely having a process that everyone complains about might lead some to “add” legal and EEOC complaints on top of their HR process complaints.

Loss of recruiting budget — although it’s not a direct revenue impact, when executives hear that you are abusing their customers and applicants, they’re likely to cut your recruiting budget even further. They might even demand that the process be outsourced to firms that better understand and appreciate the candidate experience. It may also put some recruiting leaders’ jobs on the line.

Final Thoughts

As you can see from this list of factors, treating applicants poorly can have direct and measurable impacts on sales, productivity, employee retention, and future recruiting. Most corporations don’t know the real costs of having a bad candidate experience because they don’t have metrics to measure the pain points nor do most conduct periodic surveys to identify the frustration levels of those who never apply, those who drop out of the hiring process, and those who reject your offers. Mystery shoppers need to periodically test the system, and both recruiters and hiring managers need to be directly measured and rewarded for providing a positive candidate experience. There’s really no excuse for not improving the process. It really doesn’t cost much more to treat candidates the “right way.” Customer relationship management tools and technologies are abundant and most are easy to adapt to recruiting. The key lesson to learn from this article is that the cost of waiting to fix issues until recruiters have more time and budget may be millions of dollars.

(Spring 2010 ERE Expo attendees can learn more on this subject by attending my session on Wednesday, March 17, 2010 at 1:30 p.m. For more details, check out the entire ERE Expo Agenda here.)

This article is provided for informational purposes only and is not intended to offer specific legal advice. You should consult your legal counsel regarding any threatened or pending litigation.

  1. Dan Hilbert

    Another superb article John. When I was at Valero we hated to support the 11,000 retail hourly workforce with 60% annual turnover. In 2004, we apparently ticked-off a CSR candidate and received a scorching email, “I will never do business at Valero ever again and I will tell every friend…..”

    This made us realize that every candidate, for any position was a retail prospect. We moved forward with that objective, “Every prospect is a potential customer or lost customer.” Our 1st step was to setup automated and personalized emails, starting at the resume submission and triggered at every recruiter disposition code change. The results of that alone, acknowledging candidates and keeping them apprised on their status, transformed our candidate image. And it was all automated.

  2. Keith Halperin

    Thank you, Dr. Sullivan.
    IMHO, this would only really matter for companies who aren’t employers of choice, and in this economy (and unfortunately for the near future at least) almost ANY company that is hiring is an employer of choice. Those companies who are, can treat candidates poorly as long as they are considered desirable places to work.

    Realistically, most companies don’t care. (When was the last type a VP of Staffing was disciplined for the legal mistreatment of ordinary candidates through a dysfunctional hiring process?) If the companies did care, they could either streamline and automate the candidate care and response process as Valero did or pay virtual assistants $2.00/hr to make sure each candidate has a professional hiring experience.

    While I believe that most companies don’t set up their processes to be deliberately dysfunctional, how candidates are treated is too low on the organiztional priority list to get attended to.

    Thank You,

    Keith

  3. Ginger Dodds

    I have to agree that one of the biggest complaints I hear from job seekers is “No easy way to make inquiries, i.e. one-way communications only .” How do you follow up on your application when everythingh as to be routed thru an online application? You can’t even go into a retail outlet and speak with a manager anymore. They direct you online. It leaves the job seekers feeling like they’ve wasted their time and would they really want to work long-term for this company?
    You have to treat your candidate with the same respect you would a paying customer.

  4. Robert Ruff

    I think this is a fantastic article. Like Keith Halperin says, most companies don’t care, but like John states: they SHOULD!

  5. Kristen Tom

    A great article. I completely agree with your thoughts on this issue, “Lost sales to the public.” Ever since I’ve had a horrible experience at this department store I have never set foot back into that place.

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  8. Carol Evans

    Great article, John! I have always said that while they may not be the right candidate, they could very well be a customer or potential customer. It’s always amazing to me how in a service industry, that can be forgotten so easily. It’s a simple matter of RESPECT, and yes, that’s important even in a bad economy when jobs are scarce.

  9. Brian Kevin Johnston

    Dr Sullivan- Your article was great. 3rd party agents follow up with the client/candidates well overall. You know this because they are still in business, and/or thriving…

    I trust the community is recognizing TPR principles are finally getting there much deserved credit…

    EnJOY your day… Brian-

  10. Joel Passen

    Many employers are still totally oblivious to the concept of building a community around their applicant pools. Most just ignore applicants- take them for granted, especially lesser known brands. Others treat applicants like circus animals requiring them to jump through burning hoops just to interview. Maybe Google can get away with this but lesser known brands absolutely can’t. And, for that matter, when the economy fully recovers and the lesser known brands start hiring again, they’ll be begging for more applicants.
    As usual, I agree with John on the basic concepts of this post and it’s nice to see people talking about this issue. Poor candidate treatment is one of the biggest diseases in the recruiting industry. Is it corporate recruiting’s fault? No. These folks typically have little to no budget. Listen, when you’re a busy corporate recruiter, there’s no immediate reward to follow up with every applicant either. You’re just trying to fill jobs.
    So, how do you break the vicious circle? How can you improve how your company treats applicants and portray somewhat of a positive brand image at the same time? And, if you’re not recruiting for a large brand, how can you do this with little or no budget?
    DO crawl before you walk. You’re not going to change your company over night.
    DON’T go lobby for a CRM system like SFDC or some complicated ATS. CRM systems are hard to use, they won’t integrate with the rest of your recruiting program and you’ll kill yourself entering data into yet another system. Big ATS are typically some of the worst offenders of create clunky processes. They’ve never been built with applicants themselves in mind.
    DO make it easy for applicants to apply to your careers page. Automate this. Newer ATS software has gotten completely affordable (some will cost less cable tv). A good ATS will thank applicants when your company receives a resume – among other things. This is a start. Avoid being a black hole.
    DON’T require applicants to set up a user name and password to send you a resume. Trust me; you can’t automate the feedback loop. Applicants, especially the A-players, are never going to log in to check on their status as an applicant. Applicant portals don’t work and never have. People have too many other places to sign into. And furthermore, applicant portals create significant drop-off rates during the application process itself. Talk to an Indeed.com sales rep, they track this stuff. Drop-off rates for some companies are as high as 50%.
    DO have a mechanism in place to automate rejections politely. Call them Thank You Letters and treat them as such. Let applicants know that you aren’t a black hole but, that you’re not going to pursue them as an applicant at this time. They’ll appreciate the feedback and this will set you brand apart. These should be simple for recruiters to use – set these templates up once and use them. If they’re not simple, no one will use them Here is a good feature check this out – http://www.youtube.com/watch?v=vq9hFgL3Vnc
    DON’T try to be like the great company your read about in FastCompany by copying some 20 step recruiting process. Keep it simple and lessen the impact on your applicants AND your team. Recruiting is linear, a set of binary yes or no decisions. Treat it as such. A smart company will train their interview teams to better assess talent. Organize your resources better. Make sure that someone on the interview team is capable of selling your company. Streamline the decision making process. This will save everyone time and energy and you’ll make better hiring decisions. Applicants will recognize that you’re efficient and thoughtful.

  11. Cathie Wilkerson

    Excellent article! Too often we forget in recruiting that we have two customers; our clients and our candidates. Bravo John for your continuous focus on improvement and growth in the recruiting industry.

  12. Bruce McCowan

    One of the issues that we need to address is how we resource the corporate recruiting functions. I see many recruitment functions built around 20 – 25 unique hard to fill roles per recruiter. With little focus on systems and processes, and a high number of applications, this leaves no time to provide a quality candidate experience.

    Dr Sullivan provides yet again some excellent examples for recruiting functions to build a business case to resource properly the corporate recruiting function. A key metric for recruitment leaders has to be candidate satisfaction. We need to continually educate the business on how a well resourced and high performing recruitment function builds the employment brand and in time will reduce the overall cost of recruitment as employee referrals increase and talent pools are built.

    PS – In Western Australia there is an acute skills shortage in the resources and oil & gas sectors with a shortage of over 100,000 workers.

  13. Marc Medios

    Having been through both sides, hiring and interviewing, I can certainly vouch for the sheer callousness of many companies, including large ones such as Kelloggs and Gillette. On the other hand, when hiring for clients, I take great care in making sure that candidates are informed, treated nicely, humanly and when not chosen, informed of that in a positive way.

    My one hope: Karma’s a bitch and it will bite uncaring and callous HR managers at some point in their lives

  14. Keith Halperin

    Bruce, if you know any WA companies/governments that will bring over a few hundred American recruiters to work on this, I’m sure they’d have a lot of takers, and I’d be one.

    Cheers,

    Keith keithsrj@sbcglobal.net
    ……………………….

    Bruce McCowan Mar 15, 2010 at 9:00 pm
    PS – In Western Australia there is an acute skills shortage in the resources and oil & gas sectors with a shortage of over 100,000 workers.

  15. Howard Adamsky

    On October 17, 2002, my first ERE article hit and was entitled “Make Believe They are Coming to Your House.”

    If you look it over, you will see it is very similar to Johns article right here.

    http://www.ere.net/2002/10/17/make-believe-theyre-coming-to-your-house/

    I find it fascinating that after almost 8 years, we are still wrestling with the same problem of how candidates are abused, ignored and mistreated. The sad part is that 8 years from now, the article will arise again and nothing will have changed. Honestly, how sad is that?

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  17. Alexis Perrier

    Thank you very much for your article. You’ve put the finger on the 400 pound gorilla in the room that no one sees.

    As a candidate, I too have really felt insulted time and time again by companies and third party recruiters for lacking basic politeness.

    When I was recruiting for a software company 10 years ago, we had a policy of motivating all candidates to join us. Even when we knew we were not going to recruit them. The idea was to boost the image of the company among young graduates so that we would have as many applications as possible.

  18. Keith Halperin

    Well put, Howard. There is at least one major difference between then and now. By going to http://www.glassdoor.com candidates can anonymously comment on their treatment, and others can see their comments.

    Cheers,

    Keith

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  24. David Lyons

    excellent article, time well spent. From a recruiters point of view its important to remember that that candidate will one day become a hiring manager and either not use the company in question or take a revenge approach and headhunt their staff

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