Written by Nathan Hewitt
What can HR learn about risk management from banks?
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 your 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’s 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 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.
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Did unconscious bias cost these recruiters £3m?
A story from a recruiter
I spent 13 years working as an agency recruitment consultant but my customer-facing jobs started a lot sooner – at the age of 12, collecting monthly charity raffle contributions for the local hospital. Paper rounds and retail jobs through school were followed by contact centres and bar work at uni, where I first learned about recruitment. It just seemed to fit with my previous experiences as well as my mindset so I figured that’s what I’d do when I graduated.
Actually, that’s a lie. It’s what I decided to do once I’d graduated and decided I hated the idea of being an employee number within a grad scheme but knew it was about time to lock in a career.
I remember my first round of recruitment interviews – I just couldn’t understand why recruiters didn’t understand that when I said “this is what I want to do” i really meant it. I explained I’d done my research. I knew that if I worked harder, longer and smarter than my competitors I would find the best candidates, I’d place them and I’d be rewarded for doing my job
But I just couldn’t get past those infernal recruitment industry group balloon debates/assessment days of the early 2000s that principally involved a white male in his early 20s talking more loudly than the rest despite not really having any substance to his bellowing. I couldn’t understand why Timmy from Surrey’s slightly shouty, verging on passive-aggressive bullying tone always got him progressed to the next stage while the more insightful, reflective comments from others around the table went unnoticed?
I persevered nonetheless and I eventually joined a recruitment process that involved one-on-one interviews followed by a group presentation from the MD. No fake debates, no pitting people against each other – just truth and honesty from the company owner.
I called my recruiter as I walked out the door to tell him I really wanted to work there. And I did, for 8 years.
Now I wonder how much more quickly I could have found a job if those balloon debating sessions had instead been replaced by a tool that helped the recruiters understand my propensity to succeed within recruitment, leveraging my personality and behaviours, my competitive nature, my desire and drive to succeed and then the recruiters combined that with my demonstrable passion for technology…
I’m pretty confident I articulated them during my interviews and backed up my answers with my life experience (at the ripe age of 22!). Alongside my early start in the world of work, I was in the first team for all sports for my entirety of senior school (I even gave Fives ago but it really wasn’t for me). I started played the piano at 4, violin at 7 and self-taught the saxophone as a teenager. I’m a classical pianist (seeing as you didn’t really ask, Shostakovich’s 2nd piano concerto with the school orchestra was my proudest musical moment) and finally I graduated with a 2:1 from a Redbrick University.
An outstanding childhood? No, I don’t think so. But I know I was well above the average for a candidate applying for a graduate recruitment career. I know there was enough about my school and working history to show my commitment to learning, dedication to working hard individually and collectively and displaying a consistent understanding of work = reward. And until those recruitment interviews I had a 100% interview to job-offer ratio. And so I wonder, how many of those companies said “no” to me because they weren’t aware of their biases?
And look, I get it. There were no AI crystal balls back then. Recruiters had to make judgement calls on candidates without the benefit of technology tools to guide them towards the right talent. But I wonder how many of those money-hungry agencies would have paid more attention to candidates like me if a recruitment tool had helped them look beyond their biases and told them I was an applicant worthy of closer attention?
My guess is pretty much all of them.
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Hiring automation: It’s Time To Use Your Words
This Recruiter Says How You Write and What You Write Can Tell an Employer a Great Deal About Your Fit.
Barbara Hyman believes the most important skill for people looking for a job in the post-COVID world will be the ability to write.
“People who think clearly, write clearly,’’ says the chief executive of the artificial intelligence-powered recruiting firm Sapia, which judges its candidates on the most basic of skills.
The firm, which has big-name backers including Myer family member Rupert Myer, former Aconex founder turned venture capitalist Leigh Jasper, fund manager Dion Hershan and former JB Were partner Sam Brougham, gives every job candidate a first interview by asking them five text-based behavioural questions on their phone that take around 20 minutes to answer.
Then the company’s predictive models assign a “suitability” score to each candidate using over 80 features extracted from their responses and the system specifically precludes the use of names, gender and age to determine the recommended shortlist, removing unconscious bias from the recruitment process.
The company’s technology has already been used by 400,000 candidates looking for roles in retail, healthcare, customer service, hospitality, contact centres and graduate and trainee roles across 34 countries.
Its clients include Qantas, Bunnings, the Iceland Group grocery chain in the UK and Spanish telecoms giant Telefonica.
But Hyman says her biggest target client in the post-COVID world is government.
She believes the economy can only be sustainably reactivated through large-scale job security and that requires redeploying existing skillsets to meet in-demand industries.
“This requires a sophisticated and scaleable solution to find jobs for those whose industries have been decimated by the pandemic and have no jobs to return to. Our solution can immediately activate these job seekers into the new economy, steering them to the jobs they will be good at, she says.
She claims if the government activated this sort of technology for a range of growth industries the economic and social impact would be unprecedented.
“In a healthy economy, the cost benefit in Australia alone is $1bn net benefit (cost) for every 100,000 workers that get back to work one month earlier through reduced welfare payments and increased consumer spending. That is significantly higher when accounting for government subsidies as a result of COVID,” she says.
“A big part of getting back to work is the confidence and the mindset. We are exploring different avenues to allow people to use our chat bot to find their true role in the new economy. This is the vision we are trying to sell to government – you have your own personalised career coach that helps you find the ideal role.”
Hyman said one of the company’s big-name backers Rupert Myer, the chair of the Australia Council for the Arts and an emeritus trustee of The National Gallery of Victoria, had given her “amazing introductions” into the government and university sectors.
“When I came into the business in February 2018 it was running out of money. I had to get a bunch of the existing investors to support me,’’ says Hyman, a former chief human resources officer at REA Group and a human resources and marketing director at Boston Consulting.
Her data science leader at Sapia is Sri Lankan-born Buddhi Jayatilleke, who has a diverse background in machine learning, software engineering and academic research.
The firm has raised $4m in the past 2 years, including bringing in Australian global recruitment and talent management firm Hudson as a strategic investor last year.
“That gave us credibility because the number two recruitment firm in the market believes in what we are doing,’’ Hyman says.
“Whether you like it or not, there is enormous amount we can learn about you in 200 words. Just the very fact we don’t use any secret or behavioural data, you have to build trust from the beginning with your candidate. The completion rates are 95 per cent, the engagement rates are 99 per cent. But the key point is when we give you back your feedback. It is effectively a public service we are performing with this feedback.”
One of the firm’s initial backers was Rampersand, the venture capital firm which has a focus on early growth stage tech businesses.
Rampersand co-founder Paul Naphtali says the firm invested in Sapia for its ability to put data at the centre of a company’s people strategy.
“It’s a massive challenge for a start-up to aggregate the data and build the algorithms that can identify an individual’s suitability to a role quickly and accurately. It was a bold and ambitious plan from the beginning, and Sapia is now well on its way to becoming that data-centric engine,’’ he says.
“The company started with working to turbocharge the recruitment process by quickly identifying the right talent for the right roles.
“It’s taken time to build the tech and the data sets, but it’s paying off as a number of Australia’s leading companies now have Sapia as a default part of the process.”
He says the firm is now entering a new phase “where it also powers internal people management as well as for job seekers, which is obviously very relevant in the current environment”.
Recently in London Sapia was awarded the TIARA Talent Tech Star which honours the businesses globally in the talent acquisition industry.
Source: DAMON KITNEY, The Australian, October 30, 2020
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Candidate Experience Solution of the Year Award – Finalist
Sapia (Formerly PredictiveHire) is a finalist in the Talent Tech Star Awards for excellence in Candidate Experience.
About the awards
“HR Tech is now a $400bn global industry that enables employers and recruiters to put the right people in the right jobs and perform better,” said Becky Wilson, Editor of TALiNT International magazine. “The Talent Tech Star Awards will highlight the valuable contribution of HR Tech to the UK economy in a campaign brought to life by interviews with finalists and panel of judges.”
“The TIARAs are distinguished by the rigour of its judging process and the quality of its judging panel,” said Alex Evans. “We assess the impact of Talent Tech solutions on clients, candidates and employees through 5 key metrics. These are excellence in delivery; innovation; sustainable value; business growth; and purpose.”
Sapia and Candidate Experience
Candidate interviews and assessment re-imagined! Through a smart chat interview of 5 free form questions, our AI uncovers soft skills, role-specific traits, and written communication skills of every applicant. This gives customers a bias-free ranked list of every applicant. We capture no sensitive information like gender, age and race.
Candidates love it – we have a 95% completion rate and a 99% satisfaction rating.
- A non-timed chat-based interview is fast and comfortable – no more intimidating, biased and unexplainable assessments
- Every candidate receives personalised feedback and coaching tips – no more black box recruitment!
Candidate Feedback:
This is amazing, the most I’ve ever got out of a job application when I’ve never expected anything. You guys are going above and beyond to support employers and employees. This feedback has greatly improved my application and interview skills and has given me new insights to aid me in future employment.
I found this tool very magical, if I can put it this way. It just has a way of showing the inside part of someone. The outcomes are exactly what I have been feeling about myself, what a junior friend told me not long ago.
Wow this evaluation hits the nail on the head. Each of these are a perfect description of who I am and my beliefs working in a team environment.
THE CANDIDATE EXPERIENCE SOLUTION OF THE YEAR
This Award recognises a solution that has best-enabled employers and / or agencies to improve candidate experience and success in talent acquisition.
The judging panel brings together expert perspectives from senior HR and Recruitment industry leaders, investors, and advisors. Together they make the TIARA Talent Tech Star Award a powerful and prestigious endorsement. The panel includes:
- Adam Hawkins – Head of Search & Staffing UK&I and EMEA at LinkedIn who works with recruiters and RPOs to make better use of their talent data and insight
- Simon Devonshire OBE – investor, NED and serial entrepreneur, co-founder of Wayra Europe and former Entrepreneur in Residence at BEIS who advises corporates on how to innovate and invest in talent
- Chris Gray – Sales and Marketing Director of ManpowerGroup UK and the Managing Director of ManpowerGroup Ireland who leads in the creation and delivery of innovative workforce solutions and services
- Umerah Akram – Head of London Stock Exchange Group’s ELITE, an ecosystem and platform for 1200 private companies from 42 countries to help them prepare and structure for their next stage of growth and investment
- Parveen Dhanda – Head of Programmes at Tech Nation and Programme Lead of the Future Fifty, which offers practical support to enable fifty of the most promising growth-stage digital businesses to reach their full potential in the UK
- Michael Rendell – Founder Partner at Nala Ventures & Investments LLP and former Partner and Head of Innovation and Transformation at PwC who led on embracing the impact of new talent technologies, including AI, machine learning, and elastic workforces
Are you interested in using an award-winning solution in your business to improve the candidate experience? Let’s chat
Sapia (Formerly PredictiveHire) was also named the Top 3 Best Conversational AI in HR Solution at CogX