The Royal Commission has brought about a lot of scrutiny on the banks, and for good reason. But we have to give them credit where it’s due.

Compared to HR teams across the country, banks know a thing or two when it comes to managing risk.

Which is funny, as I’d argue that hiring a staff member is a much riskier proposition for a business than a bank having one of its customers default on a loan.

Imagine if your bank lent you money with the same process that your average recruiter used to hire for a role.

They would ask you to load all of your personal financial information into an exhaustive application form. Your salary, your weekly spend, your financial commitments. All of it.

The same form would include a lot of probing questions, such as:

• Will you pay this money back on time?
• When have you borrowed in the past and paid back on time?
• Describe a time that you struggled to repay a loan and what you did about it?

Then, assuming your form piqued their interest, they would bring you in for one on one meeting with the bank manager. That manager would grill you with a stern look, asking the same questions. This time though, they will be closely watching your eye movement to see if you were lying when you answered.

In each part of the process, you get a score, and then if that number is above a certain threshold, you get the loan.

It’s almost laughable, right?

Banks wouldn’t have any customers if they used that approach.

Only people who desperately need money would put themselves through that process. And they’re likely not the best loan candidates.

Banks work hard to attain incredibly high accuracy levels in assessing loan risk.

Meanwhile in HR, if you use turnover as a measure of hiring accuracy its as low as 30–50% per cent in some sectors. If you combine both turnover and performance data (how many people who get hired really raise a company’s performance), it might be even lower than that.

Banks wouldn’t exist if their risk accuracy was anywhere close to those numbers.

Well, that’s how most recruitment currently works — just usually involving more people.

There are more parallels here than you think.

Just like a bank manager, every recruiter wants to get it right and make the best decisions for the sake of their employer. As everyone in HR knows, hiring is one of the greatest risks a business can take on.

But they are making the highest risk decision for an organisation based on a set of hypotheses, assumptions and lots of imperfect data.

So, let’s flip the thought experiment.

What if a bank’s risk management department was running recruitment? What would the risk assessment look like?

Well, the process wouldn’t involve scanning CVs, a 10-minute phone call, a face to face interview and then a decision.

That would be way too expensive given exponentially more people apply for jobs than apply for loans each year. Not to mention the process itself is too subjective.

I suspect they would want objective proof points on what traits make a candidate successful in a role, data that matches the candidate against those proof points and finally, further cross-validation with other external sources.

They wouldn’t really care if you were white, Asian, gay female. How could you possibly generalise about someone’s gender, sexuality or ethnicity and use it as a lead indicator of hiring risk. (Yet, in HR this is still how we do it.)

Finally, they’d apply a layer of technology to the process. They would make it a positive customer experience for the candidates and with a mobile-first design. Much like a loan, you’ll lose your best customers if the funnel is long and exhaustive.

I’m not saying that banks are a beacon of business. The Royal Commission definitely showed otherwise. But for the most part, they have gotten with the times and upgraded their processes to better manage their risk. It’s time HR do the same.

Suggested Reading:

The CHRO Should Manage Bias Like the CFO Manages the Financials

What Job is HR Being Hired to do?

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The Pulse of Innovation in HR

A few weeks ago, I had the privilege to attend Sir Ken Robinson’s opening keynote speech – ‘The Pulse of Innovation’ – at HR Tech World Congress in London.

(You might recognise Sir Ken Robinson from his Ted Talk, ‘Do schools kill creativity?’, which has been viewed almost 45 million times so far.)

As expected, Sir Ken’s speech was filled with equal parts of humour, inspiring stories and thought-provoking ideas around creativity and innovation at work.

Sir Ken opened by highlighting that the average lifespan of organisations is now shorter than it ever has been, and he stressed the importance of continuous innovation and adaptation to external factors in order for organisations to survive – quoting the famous example of Kodak as a company that failed to do so.

Given the context of his speech, it came as little surprise that he stressed the importance of HR’s role in facilitating innovation by identifying and refining talent, and he brought forward one key point which I found particularly interesting – human talent is often buried.

Human talent is often buried

Sir Ken’s point is that talent is not something that we can easily identify, it is something that is hidden within individuals, and it is HR’s role to ‘mine’ for that talent.

“Human talent is highly diverse and it’s often buried. Human resources are like natural resources, you have to go and find them, cultivate them, refine them. If you do this you find that people are capable of extraordinary things.” Sir Ken Robinson

Everyone has potential but it can be quite difficult to see it amongst all the noise and stereotypes we bring with us.

To illustrate this point, Sir Ken cited his own experience interviewing Sir Paul McCartney and George Harrison, both members of a band I think you might know the name of.

During the interview, Sir Ken was surprised to find out that neither of these immensely talented musicians was recognised by their music teacher as ‘top of the class’ – yes, they happened to have the same music teacher in school.

This truly highlights the limitations of our ability to be able to determine what talent looks like (the poor music teacher must really have had to re-evaluate his assessment protocol!).

One of the reasons for this is that we are all inherently bias. While this bias is not conscious, it does affect decisions we make every day.

The ability to categorise or stereotype is an important developmental and evolutionary process that helps humans make sense of the world.

Stereotypes help us make judgements quickly without having to source all pieces of information, but it is detrimental when applied to identifying human talent and hiring decisions.

A basic example; in recruitment and talent acquisition, if successful salespeople in our organisation have all previously had red hair, we might decide that we should only hire red-haired sales assistants.

As human beings, when we try to identify what good ‘looks like’ we concentrate on a few aspects of an individual, and may end up ignoring other important factors that lead to success.

This was further highlighted in a recent Harvard Business Review article, where it was found that 40% of individuals in their study of 1,964 ‘high potentials’ (employees in the top 5% of the organisation) were incorrectly classified as belonging in that category.

In other words, almost half of those identified by managers were not high potentials at all.

42% were below average, with 12% actually being in the bottom ranks with regards to leadership effectiveness.

The point clearly illustrated here is the inability of managers to correctly identify high potentials by not concentrating on the right traits and skills of an individual – they are only human after all.

Taking the human [bias] out of hiring – to make it better for the human

Sir Ken Robinson spoke in detail about the success of the Beatles and how it was due to the diversity within their group – something that is almost impossible to achieve when allowing subjectivity to guide hiring decisions.

One way of addressing subjectivity and unconscious biases in the hiring process is to make use of data-driven technologies.

Using data to inform hiring decisions means HR can take into account the traits and skills that actually lead to performance, rather than keep focusing on hiring based on subjective stereotypes of success.

At Sapia, we develop predictive models, powered by artificial intelligence, that can predict the likelihood of candidates performing well in organisations based on their behaviour – not on the stereotype they fit into.

Our algorithms and questions are created so that everyone is given an equal opportunity to succeed and be considered, based on what actually drives performance – regardless of age, gender or nationality.

Through adopting AI and data science in the HR field, we can get one step closer to bias-free hiring and increased diversity within organisations.

Whilst AI does take the human out of some part of the hiring decision, the outcomes ensure the human is at the forefront with more opportunities for all.

If you would like to learn more about how AI can impact hiring outcomes in your organisation, feel free to get in touch with our sales team. You can also try it out here for yourself right now!