Given the choice between two items, our brains try to convince us to choose the rarer “limited edition” option. That’s why people line up for days to buy the newest iPhone and why recruiters feel the need to hire the first (nearly) qualified candidate they find.
Remember when everyone panic-bought toilet paper at the start of the COVID-19 pandemic? That was a prime example of scarcity bias in action.
Scarcity bias says that the more something is in short supply, the more we value it. So we rush to buy products where there are “only a few left,” prioritize opportunities that are perceived as time-limited, and chase the difficult-to-pin-down dating partner over one who is easily accessible—regardless of the actual quality or value of the product, opportunity, or person.
In the recruiting world, scarcity bias can play a significant role in how hiring decisions are made. When recruiters, hiring managers, and leaders perceive a shortage of qualified candidates (overall or in a given specialty), they become convinced that the best ones must be snatched up quickly before competitors can get them. The result is a rushed and less than thorough hiring decision where candidates who may not be the best fit for the role, the team, or the company are chosen based more on their perceived scarcity than on the expectation of their long-term ROI.
What Causes Scarcity Bias in Hiring?
Scarcity bias arises whenever we perceive a limited supply of something we want. In recruiting, there are five main reasons why recruiters may see certain candidates as scarce:
- Tight labor market conditions: In competitive job markets or during peak hiring seasons, recruiters may rush decisions to avoid losing top candidates to competitors.
- High demand for specific or niche skills or qualifications: When there is a shortage of candidates with certain skills or qualifications, recruiters may feel pressure to make quick decisions before someone else hires the skills they need, fearing they may not find suitable replacements.
- Limited candidates in the pipeline: Recruiters may feel a sense of urgency to fill open positions when there are few candidates in the pipeline or when geographic or other limitations make it difficult to find suitable candidates. This urgency can lead to overlooking potentially suitable candidates who may not fit the traditional mold but could be developed or trained.
- Internal pressure: In some cases, internal pressure from higher-ups can push recruiters and hiring managers to make rushed decisions to meet aggressive timelines.
- A candidate says they have multiple offers. Candidates themselves can strategically manipulate their own scarcity value by conveying that they have multiple job offers. Recruiters are more likely to get anxious and make quick decisions to secure the candidate who now has perceived “high value.”
The scarcity can be real or imagined. There does not actually have to be a limited supply of skills or candidates for scarcity bias to occur. Their perceptions of candidates being abundant or scarce make a big difference to a hiring team’s behavior regarding how much they want or are willing to pay for the candidates in question.
Scarcity bias has the same result as urgency bias in that it can lead to rushed hiring decisions and overlooking qualified candidates. However, the motivations behind them are different. Urgency bias is driven by perceived time constraints and the immediate need to fill a position quickly. In contrast, scarcity bias is driven by the perception that qualified candidates are rare or hard to find.
What’s the Impact of Scarcity Bias on Recruiting?
Scarcity bias amplifies FOMO (fear of missing out), leading teams to make impulsive decisions. Think about it: if you believe there’s a limited opportunity to get your hands on someone of high value who won’t be in the market for long, it’s not surprising that you would be willing to make trade-offs and overlook certain flaws or red flags in that candidate.
Then, recruiters throw the usual checks and balances out of the window. For example:
- Scarce candidates are not vetted properly, resulting in a poor fit.
In a rush to secure scarce candidates, recruiters may not vet them thoroughly or give undue weight to candidates who are perceived as scarce, even if other candidates could be equivalent or better fit for the role.
- Short-term need trumps long-term fit, resulting in higher turnover.
FOMO can lead to hiring someone who meets immediate needs but is not the best fit for the long-term goals or culture of the company. This often results in high turnover and additional recruitment costs downstream.
- Sourcing becomes tunnel-visioned, resulting in misallocation of resources.
Recruiters may focus solely on finding candidates with specific skills or experience rather than considering individuals with transferable skills or potential for growth.
- “Hot” candidates capture everyone’s attention, resulting in neglected talent and missed opportunities.
Candidates perceived as “hot” may be passive candidates who are not actively seeking a job, candidates with niche or boom skills like data scientists or AI experts, candidates from top schools, or those with offers from multiple companies. Since these candidates are perceived as “rare” or “hard to get,” employers may compete more aggressively for them by offering incentives or fast-tracking the hiring process, regardless of their actual fit for the role.
- Scarce talent receives inflated salary offers, resulting in higher costs.
Salary offers are inflated to secure a perceived rare candidate, leading to budget constraints and potential resentment from other employees who feel they are being underpaid.
- Post-hire favoritism takes hold, resulting in moral issues.
Once hired, companies might put extra effort into retaining employees with scarce skills or qualifications, offering them better career development opportunities, promotions, or compensation to prevent them from leaving. Favoritism can set a dangerous precedent, undermining meritocracy and breeding resentment among other employees who feel overlooked or undervalued.
How Do You Measure Scarcity Bias in Hiring?
In some respects, scarcity bias feels very obvious. If you can’t get hold of something, you’re aware that your instinct is to chase it even harder. However, quantifying scarcity bias can be tricky as there are two separate things to consider: scarcity as an objective reality, and scarcity bias as a subjective perception.
Scarcity is a real construct: there isn’t enough talent in the market for the jobs available. Scarcity bias occurs when we allow that concept—real or perceived—to influence hiring decisions.
How to measure scarcity
To measure scarcity effectively, examine the situation to gain an objective view of candidate availability. External labor market data will tell you whether there’s a healthy supply of candidates for a role in your area. If there is, yet you or your hiring team perceives a scarcity of talent, then there is a bias at play.
From there, you can assess the size and quality of the candidate pool for different positions. If certain positions receive fewer applications or have a smaller talent pool, this could be an indication of actual scarcity and not perceived scarcity. You can also track the number of candidates who drop out or reject offers, as this may point to competition for a limited pool of qualified candidates.
Actual scarcity differs from scarcity bias in the sense that you will have to develop specific strategies to attract, develop, and retain scarce talent. For example, when trying to attract hard-to-find nursing candidates, investing in students or offering tuition reimbursement for current employees looking to become nurses may yield a better outcome than competing for the few available nurses.
Make sure you are not sabotaging your own efforts by unintentionally creating barriers that may limit your ability to attract and engage your target candidate pool. Start with an evaluation of your employer brand. Job seekers prefer to work for organizations with positive workplace cultures, strong values, and good reputations, so make sure you’ve done the work to establish and market your employer brand —keep your eyes peeled on workplace culture tracking organizations like Glassdoor and Indeed ratings that can deter candidates before they even self-identify as qualified and interested. Unrealistic and overly demanding job descriptions can also create perceived scarcity, as fewer candidates will meet the criteria.
Last, integrate your application process—are you creating too many barriers in your process itself? Are you asking candidates to create usernames and passwords, asking inappropriate questions for an application (social security number, reference, date of birth), requiring extensive up-front assessments, or taking too long to respond to qualified candidates?
How to measure scarcity bias
There’s no single metric or tool that can definitively measure scarcity bias. You can, however, look for signs and patterns in your hiring data that could suggest a bias at play. Here are some factors to track:
- Discrepancies in hiring metrics: Look at your time-to-hire, cost-per-hire, applicants-to-offer, interviews-to-offer, and offer acceptance rates. A significant discrepancy in these metrics for roles perceived as scarce versus other roles may indicate scarcity bias.
- Major differences in offer packages: Routinely making higher offers for perceived scarce roles, though the candidate has experience or skills similar to other hires, could be a sign of scarcity bias.
- Expedited interview processes: If scarce roles have fewer and faster interview rounds and less rigorous processes, this could result from urgency driven by scarcity bias.
- Lack of diversity in your perceived scarce roles: Is the urgency to hire quickly overshadowing efforts to consider a broad range of candidates?
- Lower post-hire performance or retention rates: If you find that hires for perceived scarce roles have a higher turnover rate or lower performance than other hires, this may suggest that scarcity bias has led to sub-optimal hiring decisions.
It’s important to note that, even when there is a real scarcity at play, that doesn’t necessarily mean you want scarcity bias to add undue pressure to your hiring team, resulting in bad hires: the two are not mutually exclusive. Endless data exists, reminding us of the consequences of poor hiring choices, even in a talent-light environment.
It’s also important to remember that scarcity bias cuts both ways—candidates that you believe are scarce may also believe they are scarce. With that, they believe they have more power or additional leverage than other candidates may not possess. Scarce candidates can quickly drive scarcity-biased decisions.
How To Combat Scarcity Bias in Recruiting
Do you have a problem with scarcity bias in your recruiting process? What can you do about it? Here are some strategies to help you realign the perception of scarcity for your recruiters and hiring managers:
- Expand the candidate pool
First, remove barriers that prevent or deter candidates from applying for you jobs. Align your application process with your candidates’ expectations. Then, raise the volume of candidates by expanding your sourcing beyond traditional channels. Referrals, passive candidate outreach, partnering with diversity-focused organizations, or networking in relevant professional communities can help you reach a more diverse and larger pool of candidates. In nursing, for example, this might include sponsoring overseas applicants or last year’s nursing students.
- Set consistent hiring criteria
Clearly define the skills, experience, and qualifications necessary for the role. Train recruiters in your methods to ensure consistency in evaluating candidates across all roles. For example, don’t let interviews run away from you just because there is a perception that the candidate has particularly scarce skills. The interview still needs a set of baseline questions to probe the candidate’s attributes—the assessment should always return to “Would I hire this candidate if they were not scarce?”
- Set a consistent hiring process
Clearly define the evaluation process. When scarcity bias seeps in, it’s tempting to skip steps, allowing candidates to get offers on the phone during a screening call or even at the end of their online applications. Time and time again, bypassing the process makes the candidate feel good and the hiring manager feel like they got a win—but what does the data say? Are these good hires or impulse decisions quickly regretted?
- Evaluate for fit, not scarcity
Encourage your hiring managers to shift their focus from rarity to suitability when considering potential hires. Instead of falling into the “hot candidate” trap, consider how well a candidate fits with your company’s culture and values and how likely they are to grow within the organization. Your retention and post-hire performance data can tell you much about what a good fit looks like—use these insights to inform your hiring decisions.
- Build your pipeline
Maintain relationships with potential candidates who may not be immediately available but could be a good fit in the future. This reduces the pressure to hire quickly when vacancies arise.
- Look internally
You may have more qualified candidates than you think already working for your organization. Invest in training programs to upskill or reskill existing employees or candidates who show potential but may need more specific experience or hard skills. This has the added benefit of showing growth opportunities within your company, which can be a powerful tool for attracting and retaining top talent when you’re in a genuinely scarce talent market.
Final words
Scarcity bias is one of the more accessible cognitive biases in recruiting. Once you’re aware that you’re being tempted by the first candidate who appears to tick your most critical boxes, all you need to do is hit pause and ask yourself a few questions: Is the scarcity real or artificial? Is this someone I would hire if their skills were not scarce or if they did not have competitors banging at their door? Am I just trying to solve a short-term problem without considering the long-term implications of this decision?
Once you get in the habit of watching for the scarcity bias, you’ll make fewer impulse judgments and better hiring decisions. And you’ll never feel the urge to stockpile toilet paper again.
