What Does Due Diligence in Hiring Encompass? (2024)

In the age of social media, with job applicants’ lives out in the open for all to see, do you have an excuse if your company makes a catastrophic hire?

According to CareerBuilder, nearly three-in-four employers have been affected by a bad hire. And there are other repercussions, as well:

  • The average cost of one bad hire is nearly $15,000, while the average cost of losing a good hire is nearly $30,000.
  • Two-in-three workers say they have accepted a job and later realized it was a bad fit; half of these workers have quit within six months.
  • 75 percent of workers say they’re loyal to their current employer; many fewer (54 percent) say they feel their company is loyal to them.

Sometimes when a newly hired employee is a bad fit, it turns out there was chatter across the industry about said person. For instance, a friend of mine experienced work life last year with a sexual harasser, who also happened to be wildly incompetent at his job. Yet he was hired by a reputable, well-known publishing company. After a year on the job, complaints made to Human Resources by my friend, and observations of inefficiency and low-quality work by many, he finally was let go. After he was terminated, the gossip mill in the industry that was there all along finally was revealed out in the open. It turns out he was so loathed at his previous company that his former co-workers not only celebrated when he left, they celebrated a year later on the one-year anniversary of his departure!

It may have been commendable good manners that kept this gossip from emerging until after the bad hire left, but the question is: Why wasn’t any of it known before he was hired in the first place?

It seems many people are embarrassed, afraid, or feel too bad to tell the truth when prospective employers call for references. Don’t they know there’s such a thing as damning with faint praise? If they feel bad about being the one to spill the beans on someone, shouldn’t they know, or be trained to know, they can say very little, which, in itself, says a lot? That brings me to the first question on this topic: Should you train, or prepare, your own employees to provide references, including what not to say to avoid legal trouble, and how to be honest, even when the manager giving the reference doesn’t feel comfortable detailing incompetence or poor behavior?

The second, related question is: How do you prepare managers to call for references? Are there certain initial and follow-up questions they should know to ask, along with techniques for reading between the lines?

Another discussion topic that may arise in many companies is the role social media should play in researching applicants. Facebook pages have privacy protections, but often people choose not to turn on those privacy protections or forget to do so. In those cases of a public Facebook page, is it OK to snoop and see what you find? You could discover how potential candidates converse with others in writing, and the things they express interest in. It would give you insight into people’s temperament, the kinds of people they are friends with, and their values.

Another way of doing due diligence is informally asking people you know at the applicant’s company or a professional group he or she participates in if they also know this person you’re in the process of interviewing. Legally speaking, you may be able to casually ask if anyone knows the applicant, leaving it an open-ended question, while you may not be able to ask for references without the applicant’s permission. It’s hard to imagine getting into legal trouble simply for asking, “I met someone recently who worked at your company. Do you know her?” A general question like that may be all you need to start an avalanche of feedback—good or bad. The key is keeping your inquiry to “do you know?” It becomes a different, potentially legally perilous, conversation when you start with “A person who worked at your company is applying for a job with us…” No harm just asking if someone else in the industry knows someone you’ve recently met, right?

Do you have any other ideas for getting valuable information before you hire a potentially great—or disastrous—new employee?

Post Views: 2,337

What Does Due Diligence in Hiring Encompass? (2024)

FAQs

What Does Due Diligence in Hiring Encompass? ›

Due diligence is crucial in minimizing unforeseen complications and ensuring that decisions are well-informed. Due diligence in HR is the comprehensive process of thoroughly evaluating a candidate's qualifications, background, and suitability for a particular role within an organization.

What is due diligence in hiring? ›

Updated September 30, 2022. HR due diligence is the process through which a company acquiring another analyzes the employees within the company and the policies and procedures that affect them. Engaging in due diligence can help a company avoid losing its talent after securing an acquisition deal.

What does due diligence include? ›

A due diligence check involves careful investigation of the economic, legal, fiscal and financial circ*mstances of a business or individual. This covers aspects such as sales figures, shareholder structure and possible links with forms of economic crime such as corruption and tax evasion.

What is included in HR due diligence? ›

HR due diligence is the process by which an acquiring company analyzes the human capital within a company as well as all of its procedures and policies surrounding the human capital of the company.

What does due diligence in the workplace include? ›

Due diligence requires taking all reasonable steps to protect workers from harm. "All reasonable steps" is based on the level of judgment and care that a person would reasonably be expected to do under the circ*mstances.

What are the 3 examples of due diligence? ›

The due diligence in business circ*mstances refers to organizations practicing prudence by carefully assessing associated costs and risks prior to completing transactions. Examples include purchasing new property or equipment, implementing new business information systems, or integrating with another firm.

What demonstrates due diligence? ›

To effectively demonstrate Due Diligence, you must take all reasonable precautions in the circ*mstances to carry out your work and your health & safety responsibilities. This is the standard of care to comply. Effective supervision and a common goal of safety planning and compliance are key elements of due diligence.

What should be included in a due diligence checklist? ›

This component of a due diligence checklist should encompass:
  • Company Structure and Legal Standing. ...
  • Contracts and Agreements. ...
  • Intellectual Property (IP) and Trademarks. ...
  • Regulatory Compliance and Permits. ...
  • Litigation and Legal Disputes. ...
  • Environmental and Sustainability Concerns. ...
  • Data Privacy and Security.

What should I prepare for due diligence? ›

Here are four steps to prepare you for the due diligence process:
  1. 1 Be honest. Get used to having honest conversations. ...
  2. 2 Record & store information from the start. ...
  3. 3 Ask questions. ...
  4. 4 Consider it as an opportunity to find the best match.

What are employee due diligence procedures? ›

Employee Due Diligence is not merely restricted to understanding the person's qualifications and collecting the identity document. Rather, it is a comprehensive exercise involving thorough identification and verification of the employee's identity, financial background, and professional and criminal history.

What are the 4 P's of due diligence? ›

What are the 4 P's of due diligence? The 4 P's of due diligence are People, Performance, Philosophy, and Process.

What are the 4 due diligence requirements? ›

The Four Due Diligence Requirements
  • Complete and Submit Form 8867. (Treas. Reg. section 1.6695-2(b)(1)) ...
  • Compute the Credits. (Treas. Reg. section 1.6695-2(b)(2)) ...
  • Knowledge. (Treas. Reg. section 1.6695-2(b)(3)) ...
  • Keep Records for Three Years.
Jan 22, 2024

What is the best way to describe due diligence? ›

What Is Due Diligence? Due diligence is an investigation, audit, or review performed to confirm facts or details of a matter under consideration. In the financial world, due diligence requires an examination of financial records before entering into a proposed transaction with another party.

What is a due diligence interview? ›

Financial Due Diligence Interview Process

The interview process is designed to assess the candidate's skills and experience, as well as their understanding of financial due diligence, accounting, and financial analysis.

What does it mean when someone says do your due diligence? ›

Diligence means "the attention or care required," and due is used in this phrase as an adjective meaning "appropriate, expected, or necessary." So when you perform due diligence, you give some project the kind of care and attention that it needs.

How to do due diligence on a new job? ›

Listen carefully to the responses current employees give when you ask questions about the role, the specific team you'd be joining, and the overall organization. Watch out for vague or coded answers — and, of course, dodged questions. Don't be afraid to ask follow-up questions to get more clarity. High turnover.

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