Fair Chance Hiring Done Right

With the current state of the economy and the impact of the labor shortage, many businesses are looking for ways to expand their hiring reach to fill critical gaps. One growing trend is second chance hiring, which taps into a population of nearly 70 million Americans with a criminal record who are often marginalized from the workforce. To better understand the full scope of the problem and how businesses can use second chance hiring to boost their talent and address a deeper societal issue, we spoke with Jeffrey Korzenik, a long-time advocate of fair chance hiring and author of Untapped Talent: How Second Chance Hiring Works for Your Business and the Community.

 

How and why did you become an advocate for hiring individuals who have a criminal record?

 

I am the de facto economist for a large commercial bank, responsible for roughly 45 billion in investments and leading the team that allocates that. To do that job, you must understand what is going on in the economy and, on a more granular level, what’s going on in the labor force. Around 2013 or 2014, I started hearing from a lot of manufacturers who couldn’t find people to hire, and they specifically were having trouble finding people who could pass drug tests. I started looking into addiction and found that social ills that emerged in the last economic cycle were playing a role in hurting our labor force in ways we’ve never seen before and had become major economic burdens. From challenges of addiction, you move very quickly to long-term unemployment and the economic impact of being involved in the criminal justice system. At the same time as I started to understand this economic problem that we’re facing, I was very fortunate to meet several employers who had found a solution. They had approached people with criminal records and those otherwise marginalized from the labor pool as a true talent pool and created processes that made them not just viable employees, but very good employees. I started to share that information with the business community and one thing led to another.


Why is it important for business to have a fair chance hiring model? What can they gain from hiring individuals with a criminal past?

 

I always view this from the business perspective because if we’re going to solve this problem it needs to be scalable, which means it needs to be profitable from the business community’s perspective. It also must be done the right way, and there are a lot of models attempted by people in the business community without success. And the problem isn’t the population of employees, the problem is the process that companies are utilizing. But if it’s done right, businesses will get employees who are exceptionally motivated and engaged, which is a recipe for productivity and in turn drives profitability. Employers that have done this right have very low turnover rates relative to their industry and have saved on those costs, but they also end up with employees who really care about their job, stay in one place, and become very good employees who drive that bottom line.

 

With regard to the current labor shortage, how can businesses benefit from this trend in second-chance hiring?

 

AdobeStock_282672294This labor shortage has been coming for a long time because we stopped having enough babies to replace our labor population 20 or 30 years ago, and the shortfall is so severe that even immigration can’t make up for it. To address this problem, the business community needs to dig deeper into the population to find people who can be good employees, instead of returning to the same status quo hiring pools and expecting a different result. Some businesses are starting to open their doors to people with criminal records and are looking beyond that record to see the person. That’s a good start, but it’s important for businesses that they do this the right way and treat this population as a talent pool to find the people who are a good fit and want to do the work that’s being offered, and then also give them the tools to thrive. This model is a big win for the business community, and by doing this, businesses can also capture a more diverse workforce that is reflective of the communities in which they operate, and that’s an important aspect as well.

In your book, Untapped Talent, you outline three models for hiring applicants with criminal records. Can you explain each of the models?

 

Employers in the past have followed several models, some have worked, and some haven’t, and even the ones that worked in the past may not work in the future. The starting point is one that many employers may be familiar with, which I refer to as the Disposable Employee Model. In this case, what they’re seeking out is a cheap employee, one whose wages are subsidized by the Work Opportunity Tax Credit that’s available when companies hire people with recent felony releases or convictions. But in this case, they’re not being terribly selective, the jobs tend to be low-skill and low-paying, and there is very little investment in the long-term future of these employees. It can work, and this model shouldn’t be condemned because at least they’re offering an opportunity for justice-involved individuals to enter the workforce, but it’s a model that has real limitations: there’s high turnover and it’s a case of getting what you pay for. If employers are looking for low-cost labor, they’re not necessarily going to get high quality, and given the demographic landscape where we’re running out of employees of any kind, this model probably won’t be very successful in the future as more employers figure out how to do it right.

 

Perhaps the most common model employers who have embraced fair chance hiring – and then abandoned it - have followed is going in with the right intentions, trying to be selective about making the right hire and make investments in their employees, but failing due to a lack of understanding of the needs and gaps that people with criminal records typically have. Some of these are hard obstacles, like access to housing or transportation, and some of them simply come from having a background of deep poverty and a lack of mentorship, which make it hard for these individuals to know how to be good employees, despite their desire to do so. Very often this looks like an employee simply not showing up for work, and many employers have a no-show, no-call, no-job rule. But for a population that doesn’t know they’re supposed to call in or don’t have a phone to call in, any of these things can be real obstacles. Employers that have tried this model without success have described second-chance hires as either their best employees or their worst employees, and by worst employees they might just mean the people who just didn’t show up one day. Although employers may recruit some very good workers, most employers know that one bad employee undoes the good of many good employees and often abandon the strategy.

 

The most proven model, which delivers highly engaged, highly loyal, and thus highly profitable employees, is one where employers looks for the right fit, assess who is ready for employment, have processes in place to do that, and then, critically, understand the specific gaps that this pool of employees may have and the things they may need. It may be something as simple as providing flex time to meet with a parole officer or a space to meet with that parole officer, or it might be clothing and helping connect employees to nonprofits that can help with housing and transportation. These are significant gaps for justice-involved employees and employers can often help to fill them at a very low cost, creating a very successful model for second chance hiring, a true second chance model.

 

As more companies are looking to engage in a second chance hiring model, what are some guidelines they should follow?

 

One of the things that comes up frequently is that people who are trying to implement the fair chance hiring model, particularly executives, don’t start by looking at their own hiring process, and very often there are barriers built into their process. One of the initial problems is figuring out where to advertise for a job. Boards like Monster and Indeed are fine job boards, but they may not send the right signal to this population. The most popular ones for justice-involved individuals are Honest Jobs and 70 Million Jobs, which are specifically targeting this population, so advertising on these sites sends the message that companies are truly open to hiring these individuals.

 

AdobeStock_212829606Another best practice for companies that have been doing this for a while is to voluntarily Ban the Box and get to know the candidate first, but the employer must come to that point themselves for that to work. It’s also very important to look at the review process, typically when the background check comes up with an issue, that check is reviewed by someone in HR. Without specific executive support, people who are involved in that review have significant career disincentives to say yes to a justice-involved hire and they end up feeling that if they make a good hire that’s part of their job, but a bad hire could be a career killer. There needs to be a balance in that process, either by having someone from a line of business suffering from a talent shortage be a part of that review, involving the executive suite in the review, or creating an advocate in a committee-based review to support hiring these individuals. You need balance to successfully implement fair chance hiring, and executive support is the key to achieving that balance.

 

What are some examples of companies that have implemented and are doing fair chance hiring right?

Many smaller or midsize companies come to this model earlier because they don’t have the luxuries Fortune 500 companies have of being considered employers of choice or having multiple locations. Smaller markets tend to be very focused within their communities and that has driven them to be more pioneering in the ways in which they attract talent. One example is JBM Packaging in Lebanon, OH, a company that came to second chance hiring because they ran out of alternatives, and it has been so successful for them that they are expanding their hiring and opening a second location in inner-city Cincinnati. That’s extraordinary, because how often have companies looked to inner-city, under-resourced neighborhoods to move a location to because they see the talent pool there? It has also changed the company culture and they’ve developed a process for partnering with prison authorities and halfway houses to set up a talent pipeline. They’ve also built a paid training program in an Ohio prison, so they have people coming out with the kind of mid-level skills that allow them to be paid more and be valuable employers.

There are large companies participating as well, such as Kroger, one of the largest companies in the US, which has started the New Beginnings program and is targeting people who have been marginalized from the labor force, including those with criminal records. Companies like Microsoft are starting trial programs as well, and this trend is really spreading in positive ways. A Cincinnati companies, Nehemiah Manufacturing, is another example of a true second chance company. It’s a for-profit consumer goods manufacturing company, and 130 of their 180 employees are second-chance hires. Harvard Business School sent a team there and did a case study on them a few years ago and it’s now required reading for every MBA candidate coming out of Harvard.

What would you say to someone who is skeptical about second chance hiring?

 On the political side, this is one of the few areas of bi-partisan agreement and part of what it means to be an American in the land of second chances, whether that’s through immigration or people in the business community who failed at their first venture and went on to find future success. There’s bi-partisan agreement on this. On the economic side, there are few things more important to businesses than talent management, because ultimately success boils down to people. The reality is that in a labor shortage, it’s not enough to speak publicly about appreciation for employees, it’s necessary to act on that value, and most good business people understand that. Going a step further, if this is a labor shortage driven by demographics, it would make no sense to disregard any talent pool, particularly not one that has been proven by other businesses. And if employers aren’t willing to take that leap, it’s a sure bet that their competitors will, so at that point it’s as simple as saying that second chance hiring is just good business.

Jeffrey Korzenik

Author

Jeffrey Korzenik

Jeffrey Korzenik is Chief Investment Strategist for one of the nation’s largest banks, where he is responsible for the investment strategy and the allocation of over $40 billion in assets. He is a regular guest on CNBC, Fox Business News, and Bloomberg TV and is the author of "Untapped Talent," a book on the business case and best practices for hiring people with criminal records.

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