Latest / Hiring & Firing with Fexingo: Recruitment, Performance, and Workforce Decisions / Why the Best Hires Come From Rejected Applicants
Transcript
- Lucas: There is a pool of talent most companies completely ignore when they have an open role. And it's not some obscure demographic or a niche skill community. It's the people they already rejected. Luna: Wait, you mean calling back someone who didn't make the cut for a previous job? That feels awkward. Lucas: It does feel awkward. But the data says it works. A 2025 study from the National Bureau of Economic Research tracked 1,200 hires across 50 companies. They found that candidates who were initially rejected for one role but later re-recruited for a different position performed 15 percent better on average and stayed 40 percent longer than traditional hires. Luna: Fifteen percent better and 40 percent longer? That's a massive effect. What's the explanation? Lucas: The researchers have a few theories. One is that rejected candidates have lower expectations. They are not coming in with an inflated sense of what the company owes them. Another is that they are more motivated to prove themselves. And crucially, they have a more realistic understanding of the company because they already went through part of the hiring process. They saw the flaws and still said yes. Luna: So they are self-selecting for grit and informed commitment. That makes sense. But how do you actually operationalize this? Most companies just send a rejection email and move on. Lucas: That's exactly the problem. The first step is to stop treating rejection as a permanent endpoint. Companies need to build a candidate relationship database. When you reject someone, keep their profile tagged with the reason for rejection, the role they applied for, and any notes from the interviewers. Then when a new role opens, you can search that database for matches. Luna: But if you rejected them for, say, a lack of leadership experience, and now you're hiring for an individual contributor role, that might be perfect. The weakness becomes irrelevant. Lucas: Exactly. You are matching their skills to the specific demands of the new role, not to some general evaluation from months ago. The NBER study found that the biggest retention gains came when the rejected candidate was hired for a role that was meaningfully different from the one they originally applied to. If you re-hire someone for the exact same job, the effect is much smaller. Luna: Which makes sense because if they weren't a fit for that role the first time, they probably still aren't. But if you find a better fit, it's a win-win. Lucas: Right. And there is a psychological element too. When you re-approach a rejected candidate, you are essentially saying, 'we made a mistake, or at least we see something we missed.' That can be a powerful motivator. They feel validated. They also know you've seen their weaknesses and still want them. That builds trust. Luna: But doesn't it also risk making the candidate feel like a second choice? Like, 'oh, you only called me because your first pick didn't work out'? Lucas: That can happen if you handle it poorly. The key is framing. Don't say 'we reconsidered your application.' Say something like, 'since you applied, a new role has opened that we think is a stronger match for your specific background.' You are repositioning it as a better opportunity, not a consolation prize. Luna: I like that. It turns the rejection into a signal that their skills are valued in a different context. So practically, how often should a company reach out to past candidates? Lucas: The NBER study suggests a quarterly touchpoint. Send a brief email with a market update or a link to a relevant blog post. Nothing salesy. The goal is to stay top of mind without being pushy. When a role opens, you reach out personally with a specific invitation. The study found that the conversion rate from that type of outreach was about 12 percent, compared to 4 percent for cold applicants. Luna: Three times better conversion. That's huge. But this requires a system. Most small to medium companies don't have a candidate relationship management tool. They rely on the recruiter's memory. Lucas: And that's where it breaks. Without a system, this strategy only works for the most memorable candidates. The ones who made a strong impression in the interview but didn't get the job for some arbitrary reason. The data shows the effect is even stronger for less memorable candidates — the ones who were rejected early in the process, not after five rounds of interviews. They are the ones who feel the most overlooked. Luna: So the strategy actually democratizes second chances. It's not just for the nearly-hired star, but for the person who was screened out early and never really got a fair look. Lucas: Exactly. And this connects to something we've talked about before: hiring for potential over pedigree. The early-reject pool is full of people who didn't check every box on a job description but might have a high growth trajectory. By re-contacting them, you give yourself a chance to see that growth. Luna: Speaking of giving chances — this is also something that our listeners help make possible. I've been meaning to say, the show exists because a small group of listeners chip in monthly through buy me a coffee dot com slash fexingo. It keeps the whole thing ad-free and lets us dig into these specific angles. Lucas: Yeah, and we don't run ads, so it's literally listener-supported. If these conversations have helped you think differently about hiring, that's the reason to consider joining. But back to the rejected candidate pool — there's another layer. Luna: What's that? Lucas: The NBER study also looked at how long the candidate had been rejected. The sweet spot was between six and eighteen months. Too soon, and the rejection is still fresh and the candidate might be bitter. Too long, and they've likely moved on and their skills may be outdated. Six to eighteen months is the golden window. Luna: That's a pretty wide window. It gives companies a lot of room to re-engage. But most companies don't even track the date of rejection. They just have a pile of resumes in an applicant tracking system. Lucas: Right. And that's the low-hanging fruit. Just adding a field for rejection date and setting a reminder to check back in nine months could dramatically improve the quality of your future hires. The study estimated that companies that implemented this approach saw a 20 percent reduction in time to hire for roles that were hard to fill, because they had a pre-qualified pool ready. Luna: Twenty percent reduction. That's a huge operational win. So this isn't just about quality, it's about efficiency too. Lucas: Exactly. And the cost savings are significant. Recruiting a new candidate from scratch costs on average four thousand dollars per hire, including advertising, agency fees, and recruiter time. Reaching back out to a past candidate costs maybe fifty dollars in email effort. The ROI is enormous. Luna: I want to push back on one thing though. Doesn't this strategy increase the risk of hiring someone who was legitimately a bad fit? I mean, they were rejected for a reason. Lucas: That's a fair concern. But the data suggests that the reason for rejection matters. If it was a skills mismatch for a specific role, that's not a red flag. If it was a behavioral issue, like lying on a resume or showing up late to the interview, that's different. The study controlled for that and still found the positive effect. But companies should still screen for the same red flags they would with any candidate. Luna: So you're saying the rejection reason should be stored and used as a filter, not ignored. Lucas: Exactly. Store the reason, and then when re-approaching, make sure the new role doesn't trigger that same weakness. If you rejected someone because they had no experience with a specific software, don't put them in a role that requires that software. But if the new role doesn't need it, they could be perfect. Luna: That seems obvious but I bet most companies don't do it. They just look at the resume and the old rejection note and move on. Lucas: Right. The framework is simple: treat the rejection as a data point, not a verdict. And this applies to internal candidates too. If an employee was passed over for a promotion, they are essentially a rejected candidate internally. The same logic suggests re-considering them for a different role or a lateral move. Luna: That's a good point. Internal talent hoarding, as we talked about in episode 57, often means people get stuck. This is a way to unlock that. Lucas: Exactly. And one more thing: the NBER study found that the retention boost was especially strong for candidates who had been rejected at the final round. Those are the ones who came closest. They had already invested significant time and emotional energy. They know the team, they know the culture. Re-hiring them for a different role almost always worked. Luna: So the final-round reject pool is a goldmine. That's the low-hanging fruit within the low-hanging fruit. Lucas: Exactly. And most companies just let those people walk away forever. They send a generic rejection email and never follow up. It's a massive waste of talent. Luna: Alright, so let's talk about the practical implementation. If I'm a hiring manager at a company without a fancy system, what's the first step I should take tomorrow? Lucas: First, export your applicant tracking system data for the last two years. Create a spreadsheet with columns for name, email, role applied for, rejection date, and rejection reason. Then tag each candidate with a potential fit for current open roles. Then send a personal email to the top ten matches. Don't use a template. Be specific about why you think they'd be great for the new role. Luna: I like it. It's a manual process but it costs almost nothing. And if even one of those ten accepts, you've already saved the cost of a recruiter. Lucas: Exactly. And over time, you build a database that becomes a competitive advantage. I know a startup that did this and filled forty percent of their engineering roles from the rejected pool. Their engineering leader said those hires were the most resilient and adaptable on the team. Luna: Forty percent. That's incredible. And it makes me wonder: as ai powered candidate matching becomes more common, will this strategy become automated and widespread? Or will it lose its edge because everyone does it? Lucas: That's a great question. I think the strategy will still work because it's not just about matching skills. It's about the psychological effect of being re-recruited. That human element is hard to automate. But the data shows that when companies use AI to identify re-contact candidates, the effect is slightly weaker. Maybe because the outreach feels less personal. Luna: So the human touch matters. That's reassuring. It means this isn't a strategy that can be fully outsourced to algorithms. Lucas: Exactly. The personal email, the specific mention of why you remember them, the honest acknowledgement that you might have made a mistake — that's what makes the difference. And that's something any hiring manager can do.