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Little White Lies Yield Red Ink for Corporate Recruiters

When aggressive marketing becomes outright lying, the result is excessive turnover, bloated recruiting costs and a lack of loyalty and commitment.

November 6, 2003
Related Topics: Candidate Sourcing, Staffing Management

The boss is an over-caffeinated tyrant. The hours are brutal. That bit in the job description about "unlimited possibilities for a creative team player"? A classic bait-and-switch tactic, perfect for luring executive hires cross-country to dead-end jobs working for the CEO’s golf buddies and brothers-in-law.

    This is the kind of negative information that a corporate recruiter or interviewer might feel the urge to suppress. But to stifle workplace realities is a major mistake. Practicing strict truth in hiring can guard against a multitude of unpleasant consequences. These problems include excessive turnover, bloated recruiting costs and, worst of all, a lack of loyalty and commitment from the very employees deemed to have the highest potential value to the company. Crossing the fuzzy line between aggressive marketing and downright lying can bring them on very quickly.

    "When you aren’t honest with new hires up front, they never trust you again," says Ann Rhoades, former chief people officer for Southwest Airlines and executive vice president for JetBlue, who left that airline’s staff in 2001 and now runs People Ink, her consulting firm in Scottsdale, Arizona.

    To illustrate, Rhoades recounts how several years ago she recruited a new chairman and CEO for a 40,000-employee company called the Promus Hotel Corporation. The Promus board of directors promised her, and she in turn promised the executives she interviewed, that whoever was hired would have the opportunity and all the time necessary to turn around and build the company. One year later the board voted to sell the company to Hilton. Almost immediately after the merger was announced, the CEO and his entire top management team, whom he had recruited from his former company, resigned. Their mass departure cost the company "millions and millions of dollars," Rhoades says, partly because of the execs’ golden parachutes and partly because it was so difficult to refill the jobs that had been vacated so abruptly. Board members later told Rhoades that they hadn’t been secretly trying to sell the company the entire year, but she remains skeptical.

    Deceptive hiring tactics practiced in the middle levels of a company can also drain profits. Ronald Katz, president of Penguin Human Resource Consulting in New Rochelle, New York, says he’s a "huge advocate of the truth. You’ve got to be completely open and honest, even if you think it’s going to hurt you." He notes that many of the worst hiring nightmares emanate from intentional or "accidental" miscommunication between job-seeker and employer.

There are no surveys measuring
the number of potential recruits discouraged by ex-employees' diatribes, but there's no doubt
 that these anger-fueled anecdotes have impact.

    Fifteen years ago, when Katz was working as a recruiter for a large New York bank, he supplied job candidates to the nearly identical departments that drew up letters of credit for importers and letters of credit for exporters. In the import-letter office, staff members were honest and up-front, Katz says. The job was not very complex and the pay was low. High-school and community-college graduates were invited to apply and told that they’d be taught quickly how to do their job. They were offered tuition reimbursement so that they could go to night school and get higher degrees in the three to five years it customarily took to get their first promotion. In the export-letter department, however, ambitious young college graduates were invited to apply with the promise that they’d be promoted in 12 to 18 months. "They got bored quickly, and after 12 months, when they realized they weren’t getting their promotion, they’d get discouraged and quit," Katz says. "There was a turnover problem and a productivity problem, which cost us much more money in the long run, but the manager thought he was doing the company a favor. He said, ‘Who cares if they leave? That way we never have to give raises.’ "

    In fact, it’s an ironclad rule in the recruiting business that replacing a lost hire costs at least one and a half times an employee’s annual salary, whether it is $30,000 or $750,000 or $2.5 million, in lost productivity, overtime, severance and fresh recruiting costs. These costs do not include the incalculable effect of disgruntled ex-employees bad-mouthing their former employers at "every cocktail party they ever go to," as Dave Opton, founder and CEO of executive-level online job board Execunet, puts it.

    There are no surveys measuring the number of potential recruits discouraged by ex-employees’ diatribes, but there’s no doubt that these anger-fueled anecdotes have an impact. Opton himself relates the sad saga of a man hired as Asia-Pacific regional manager for a major beverage company. The job was based in Manila, so the man rented out his family’s house, sold the car, shipped the furniture, moved his wife and kids temporarily into a hotel and flew to Manila to search for a place to live. When he walked into his supposed new office, he was told that the company had "rethought" the position of Asia-Pacific manager, eliminating it. The man asked what was going on and was told, "We knew a major change was coming, but we couldn’t tell you because it was proprietary." After telling the story, Opton adds that the debacle was probably caused by miscommunication or office politics, not pure malice. "There’s a good chance that what really happened was the hiring manager was blindsided by someone higher up. I don’t honestly believe that most companies would do that purposely."

    Neither would most companies expose themselves to a lawsuit for fraud or misrepresentation, but court records are peppered with disappointed and allegedly deceived ex-employees suing for fraud and/or misrepresentation. Most employment contracts defend adequately against these suits, says Lori Shapiro, general counsel for Employment Learning Innovations, an Atlanta employment law consultant, but they are not bulletproof. Shapiro cites a recent South Carolina case brought by the former CEO of a pharmaceutical research lab who claims he was hired to lead a "state of the art" facility and bring it "to the next business level." Instead he was handed the reins of what he claims was a substandard lab in serious financial difficulty. The judge refused to grant a summary judgment to the defendants, and the plaintiff’s suit for negligent misrepresentation continues.

    To prevent such toxic misunderstandings, some of the most savvy workforce managers strongly recommend the counterintuitive technique of advertising a job’s "challenges" as well as its opportunities. As a bonus, they say, it’s a good way to find out just how much enthusiasm the applicant really has for the position.

    Rhoades is on the board of a regional retail chain for which she recently recruited a new CEO. She took a prime candidate out to dinner and bought her a glass of wine. Rhoades says she then told the candidate about the business styles and personalities of everyone on the board. "I said that the biggest positive about the job was that we’d support her 100 percent. The biggest negative was that we’d give her a lot more input than we should." She also frankly told the executive that she would be inheriting a below-average staff, "not A players. So she knew what she was getting into, and she hit the ground running," Rhoades says. "Since she took over, she’s replaced 75 percent of her staff. The other day she called me and said, ‘You know, at first I thought you were joking. But now I know you weren’t. Thank God you told me what to expect.’ "

Workforce Management, November 2003, pp. 89-90 -- Subscribe Now!

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