Study on Risk Analysis and Control in Employee Recruitment

Study on Risk Analysis and Control in Employee Recruitment WANG JingMin, GAO YuPing School of Economic Management, North china Electric Power University, China, 071003 Abstract Risk of employee recruitment exists in the process of human resource management. The paper analyzes the risk factors in employee recruitment from the following four aspects including return risk of recruitment cost owing to asymmetric information, selecting risk of recruitment channels, evaluating risk of talent determinant and rapidity risk of recruitment responding. The reasons for recruitment risk are then analyzed. The recruitment risk is eventually studied from the point of system analysis, and the effective way to keep the recruitment risk under control is obtained to provide suggestions and proposals for corporations understanding and analyzing recruitment risk and risk control. Keywords Recruitment risk, Risk analysis, Risk control, Employee, Asymmetric information 1 Introduction As the pivotal activity, the recruitment will result in a great loss once the risks come into being, so we must pay much attention to it. Some foreign scholars introduce sociology and psychology to the recruiting process and some internal scholars analyzes the recruitment risk from the point of game theory. The employee recruitment behavior is the process of cognizing each other between employer and employee. Though recruitment risk is expounded by different scholars, the basic recruitment risks and feasible measures are neglected. Generally the corporations confront themselves with two adverse selection risks due to the asymmetric information on the capacity of the job seeker, which are the following two selections, one is accepting the job seeker mistakenly who misfits the company, the other is rejecting the person who is essentially fit for the enterprise. [1] No matter what happens, the corporation will have obvious increasing expenditure and opportunity loss, this uncertainty is called recruitment risk. Risk can not be avoided, thus we can but identify, analyze and control recruitment risk to lower the damage caused by risk factors. Accordingly, it is of great significance to analyze the recruitment risk and find out the effective measures to avoid it. 2 Classified Risk Factors Analysis in Recruitment 2.1 Return risk of recruitment cost On the one hand, the selection of person with ability tends to return a great to the corporation. But the case is, if the person is not correctly selected, the selection cost can not be taken back which will also have a persistent negative effect with the process of time. On the other hand, the corporation ignores the human resource cost, the recruitment terms and the practical requirement are out of joint, thus the management cost increases, and result in the waste of outstanding person of ability in the society. 2.2 Selecting risk of recruitment channels On the one hand, the selected person may be the following circumstances by the way of common recruitments such as publishing the newspaper or taking part in the recruitment meetings. First, not well-rounded person, who has potentials but can t behave properly and the low quality of person will result in the management losing of the corporation. Second, the person who pays great attention to money will depart from the company due to stipend. Third, the person who is boastful has a great high evaluation about himself, and he is not serious enough, and he will in all probability deceive the enterprise. All those kinds of people will cause a tremendous recruitment risk to the corporation. On the other hand, the above damage is far higher than the expense paid for the consultant CO. Ltd and the corporation has to plunge much time and energy. It would be the best choice to capture the infrequent 755

post by the way of consultant CO. Ltd. 2.3 Evaluating risk of talent determinant This kind of risk forms on account of the improper appraisement to the job seeker. The wrong evaluation includes the following instances. First, evaluating the job seeker depending on interview, so many persons sometimes are wrongly appraised due to the irregular interview structure and improper solutions. Second, the corporation bases its criterion on the successful employer, but the case is the borderline between successful and ineffectual is usually not very clear, therefore the person is likely to be defeated after he is employed. Third, the employee bases the evaluation of the job seeker on personality. While many statistics indicate that there is little correlation between personality and occupation performance. The individual examination may be useful to acquaintanceship or training, but it may disagree with employing persons, and the selected persons are unnecessarily helpful to the corporation. 2.4 Rapidity risk of recruitment responding The recruitment rapidity is an important index to weigh the task of the human resource management. The more swift the employee responds to the job seeker, the more possible is to recruit outstanding people. Many excellent people fly away because of the slow response to the job seeker under many circumstances. If we can not seize the chance to employ the one who is helpful to the corporation, the loss to the company can t be compensated. 3 The Reasons for Recruitment Risk 3.1 Asymmetric information Generally speaking, the corporation information that the applicant masters is much less than the job seeker s information the company commands. In order to obtain the position, the job seeker may take many measures to pass false information to the corporation such as forging diploma and recommendation, making illusive achievement, concealing bad motivation and making up his blind side. In this way, he will make others believe that his actual ability is consistent with the information he offers. But if he has low capability, he is not competent for the task, and the corporation certainly will dismiss him and employ newcomer once again, and be caught into a employ, dismiss and employ again circle. 3.2 The employee s character and motivation If the employee recruits those who have good relationship with him out of his own advantages, it is a great potential risk to the company if the selected are in low capacity and bad morality and it has a bad impact on the image of the corporation. A bad signal may be passed to the excellent persons who would no longer apply for a job to the enterprise, even the staff would lose confidence in the company resulting in the outflow of the outstanding staff. 3.3 Thought and sense limit of the estimator Man s thought and sense have limit which will result in the ineluctability of the wrong decision. First, man usually evaluates the existing problems according to the examples in his mind because of excessive self-confidence which concludes the random in recruitment, subjectivity in judging and individual orientation in examination and assessment. Second, the expressing way of a problem or an event has an important impact on the answer or the solving way. People tend to see the information they want neglecting the others, in which case the recruitment estimator evaluates the job seeker according to the habit in his thought and interest. 3.4 Availability of the testing tool Many testing tools have been explored by the special institution of human resource management and evaluating experts. But all these tools have limits and will not be in full availability. If the testing validity is 80 percent, the job seeker is selected to be an eligible with a probability of 20 percent, then 756

the decision the corporation makes hereby is incorrect which will cause recruitment loss. 3.5 Instability of recruitment cost and return Generally speaking, the proper selection of person with ability would return a lot to the corporation. But if the person is not correctly selected, the selection cost can not be taken back which will also have a persistent negative effect with the process of time. On the other hand, the corporation ignores the human resource cost, the recruitment terms and the practical requirement are out of joint, thus the management cost increases, and result in the waste of outstand person of ability in the society. 4 Control of Recruitment Cost 4.1 Increase information symmetry In the case of asymmetric information, the function of labor market would be at a discount, and this will lead to the cutting down of the quality and quantity of the exchange or even no dealing which the employee and the corporation don t want to see. Therefore, both the employee and the company have motivation to quest ways to solve the asymmetric information. [2] 4.1.1 Impel the employee to pass more valuable information The corporation should pay great attention to punish those dishonest persons, increase their distorting cost, and compel the employee to pass more valuable information. For example, the corporation can declare the following information that the proportion of honest people would be twice than those dishonest ones, and the dishonest would never be recruited. In order to obtain the position, the employee would like to pass more valid information. The corporation can associate with other companies to establish an employee credit system, leaving no opportunities to the dishonest. 4.1.2 The corporation gets information on its own initiative It is a process of getting information passively for the corporation by the way of the employee passes information to the company. The corporation can also know the employee on its own initiative which is called information capture. For example, the special investigating institute can be employed to inquire the background of the employee, check curriculum vitae and job experience and verify the authenticity of the material of the employee and the ability appraisement to the former employer or the employee s graduated university. 4.2 Confirm reasonable employment standard The corporation shouldn t make decision singly considering the absolute capability difference in the course of employment. The person who has high ability means high-efficiency along with high risk. Consequently the corporation should employ the employee whose proportion of cost and benefit is low, that is to say there are output and market wage in the labor market. The reasonable employ principle is to employ the employees whose proportion of output and market wage is high. In the process of recruitment, the recruiting companies will have a low overall evaluation of the employee if the actual ability of the employee is not fully revealed and someone s potential ability and his real ability are out of joint. In this case, it is a practical selection for the recruiting companies to evaluate the employee with a discount for his real ability, and this is one of the reducing risk measures for the corporations. 4.3 Choose reasonable screening standards Reasonable screening standards such as diploma, experience and the professional certificate can weaken the negative effect the adverse selection brings to some degree. The screening standards establishment and the ability the post requires have significant correlation. The scientific screening standards can isolate a majority of the unqualified employees, and reserve quite a number of eligible persons at the same time. [3] Enacting the screening standards should base its principle on reducing recruiting cost. So it is of great significance to spend time on studying and confirming the reasonable screening standards before the recruitment. 4.4 Inspire the employees to screen themselves with non-fixed pay contract 757

Non-fixed pay contract inspires the higher ability employees. Diploma and professional certificate can screen those employees the corporation doesn t want, but it does not inspire the higher ability employee to apply for a job. [4] The common adopted way is to implement probation period. The corporation can make the higher ability employee apply for a job and meanwhile make the lower ability person refuse to apply by the way of paying the employees less payment than their value and paying them much after the probation period. Accordingly, the higher ability person and the lower ability person are isolated effectively, and the probability of the low quality person being employed is virtually reduced. 4.5 The recruiting delegates should evaluate objectively The corporation should select the recruiting delegates carefully which will touch whether the excellent employees can be selected. It has a close relationship with the corporation development and other tasks. Generally speaking, the recruiting delegates include the representatives in resource management department, the handlers, the experts or staff who are very familiar with positions. They should have high knowledge level, rich experience, and they can evaluate the employees on the bases of facts. To avoid the incomprehension of the evaluating test, the recruiting delegates need to be trained before the evaluating test to make them clear the aim of the cases and the evaluating standards for the purpose of objective evaluation. 4.6 Choose the recruiting channels Different positions need different recruiting channels. We should see not only the advantage and disadvantage of the recruiting channels but also its applicability. Sometimes several recruiting channels need to be selected at the same time to employ the proper employee. The source of the recruiting channels is shown in table 1. Table 1 The source of the recruiting channels[5] Source Advantage Disadvantage Position Application Limited candidates, can not Interior Low cost, enhance morale, the candidates Recruiting are familiar with the company, save time Advertisement Recommended by staff Communal Employment Organization Consultant CO. ltd School Recruitment Recruiting Meeting On-line Recruiting An extensive range, aim at a special group, give publicity of the corporation image The recommender knows not only the presentee, but also the organization, good recommendation can find good employee, low cost, low rate of job-hopping Low cost Positions bring new thought to the without organization, close breeding elementary is easily brought into being posts May have many unqualified All positions applicants, Increase workload, high cost The recommender and the presentee have close relationship, the information of the presentee may be reported to the corporation wrongly Can employ proficient employees, but the skill of most applicants is low on the whole All positions and secondary positions The persons have quality guarantee High cost and expenditure Manager and central position Have an expansive candidates Low cost, direct interview can know the applicant better, mass employees Spread information rapidly, not confined by space, low cost, save time, high efficiency Confined by beginner s post level Many applicants, inconvenient environment, can not know the applicant better owing to limited time Low information reliability position and secondary positions All positions 758

4.7 Application of 6 Sigma in controlling the whole process of recruitment Six Sigma is a method and tool to solve problems. The DMAIC approach which includes defining, measuring, analyzing, improving and controlling is used to change the existing process. The recruitment based 6 sigma analyzes the working procedure using statistics and find out the warp and eliminate it. It includes four steps. The process is shown in table 2. Define: identify the short-term and long-term work vacancy, define each factor and integrate all factors Table 2 Six Sigma recruitment process Measure and analyze: sum up the data of the applicants and judge who is good or bad, analyze using questionnaires statistics Improve and control: solve the problems existing in the recruitment, improve the original process and recruiting efficiency Form programs: control the existing recruiting procedure, including locale control, course control and feedback control to complete the recruitment successfully and reach the anticipate goal 4.8 Establish reasonable corporation system The establishment of reasonable corporation system has important influence to the employee recruitment. Though wage is an important factor the applicant pays great attention to, not all applicants work for the salary and many excellent people wonder whether they can realize their self-value and whether it is in favor of self-improvement. The corporation should create a superior and comfortable circumstance to attract more excellent people. The corporation s welfare, performance evaluation, interior promotion system, reputation and culture all have important influence to the applicants. 5 Conclusion [5] [1] [3]Sun Dong The human resource recruitment goes with recruitment risk. So it of great significance to analyze the risk factors in the recruiting process, expound the reasons and provide corresponding counter-measures and suggestions to control the recruitment risk from many aspects. Only the recruitment risks are completely mastered can we take effective measures to control the risks and employ the excellent people for the corporation. References ZhiQiang.Economics Approach to Personnel. Economics Publishing House, 38~39(in 2004(in Chinese) Chinese) [2]Akerlof G. The market for lemons: Quality Uncertainty and the Market Mechanism, Quarterly journal of economics, 1970, (84) :488~500. Hui.Economics Analysis of Avoiding the Risk of Employee Recruitment, journal of Liaoning University of Petroleum & Chemical Technology, 2004, (4): 88~89(in Chinese) [4]Du WenJu.Economics Analysis of Employee Recruitment, Chinese Talents, 2002, (2) Dabid. E. Terpstra, The search for Effective Methods HR Focus, May 1996:16 17Reprinted.by permission of the publisher from HR Focus.May 1996 1996,American Management.Association New Y0rk,All rights reserved. The author can be contacted from e-mail : gyp1217@163.com 759