Hiring on potential – sounds great doesn’t it? What a great way to fill a hole and maybe save some money on payroll in the process?

The strategy is becoming more widely used as business leaders recognise the many benefits; but just before you start writing those job ads to put on the nearest university’s job board, let’s look at the scenarios when hiring on potential is most likely to be the best option.You see, like most things, if it’s not done well, it can turn into an expensive dog’s dinner. Recruitment has very few shortcuts and this is no exception – there is an element of risk involved; the secret is in knowing when the risk is worth taking.

Here are the main situations where it can be a great strategy.

• When the Labour Market is Competitive

In many industries at present, it’s just too competitive for companies to find the right people with the right experience, knowledge and skill-set.

In fact, this has been the case for a while. The best candidates are snapped up quickly; those already in jobs are tied down by employers who know their value and pull out all the stops to keep them; if top candidates do look around, they will usually be demanding top dollar.

Latest figures from the Department of Education, Employment and Workplace Relations show that there are presently serious skill shortages in the engineering and resource sectors, for example.

• When the Economy is Struggling

This is a strange one. You would think that, when times are tough, it would be easier to find the right people willing to work.  However, when there is a lack of confidence in the economy, many people tend to stick with what they know rather than search around for new opportunities. It’s like a survival instinct.

• If the Position is Not in the Direct Firing Line

Of course you’re not going to hire a finance director on potential alone. This one’s fairly obvious but hiring on potential is much less stressful if you initially try filling positions not too close to the firing line.

• If there is a Big Pool of Local Student Talent

Large companies often base part of their recruiting effort on hiring local students. We can’t all be a tech start up based near the UTS in Sydney but, if your business is based in an area with a large student population, there can be a lot of untapped talent right on your doorstep. Finding ways for your business to connect with them can be a great way of bringing in future five star employees.

• If You have a Strong Culture of Learning

Unless you’re an organisation with a culture of learning and improvement then it’s unlikely that you will have the right recruitment culture to hire for potential. Trying to do so can go badly wrong.

Inflexible hiring practices stipulating must-have skills, experience and education levels are still commonplace in many organisations. It takes something of a change of culture, or you will not be equipped to fulfil the potential a candidate shows.

Those organisations with a culture of employee development can look to attract sharp and capable candidates, with bags of potential, to teach the necessary skills to become star employees.

• If You have a Value-Driven Culture

You’re more likely to be able to hire on potential if you have a strong set of values that govern day to day operations and your organisational culture.

For instance you may value innovation, environmental friendliness or excellent service above all else. If you are clear and confident in your own values then it’s more likely you will be able to identify those values in others – and make the perfect match!

• When you Have Defined Potential

What does “potential” mean to you?

Potential can mean raw talents yet to be honed; it can mean the right set of values as a person; it could be a high level of motivation to succeed in one’s career; or attitude and eagerness to learn new skills from scratch.

Or it could be all of these things and more. It needs to be defined before you can recognise it.

• When you Know What You’re Doing!

Ever heard the phrase “now you know just enough to get yourself into trouble”?

This can apply to hiring on potential, unless you have a firm understanding of what’s necessary in the selection process.

Once you have defined what you mean by potential, you need to learn to identify it.  Who deserves an interview now you have changed the selection criteria? In the interview, what questions do you ask to uncover the potential?

How do you recognise loyalty, for example? How about trust? Motivation? Commitment? Respect? Courage?

This will probably involve learning a few assessment techniques before a strategy of hiring on potential can be implemented.

Understanding when to hire on potential – and what needs to be done before you can get there – should avoid many of the common mistakes organisations make, and you should be able to land recruits with the right “fit” who turn into future superstars.