Hiring Mistake Costs
While it may be difficult to calculate the exact cost of a hiring mistake, there is no doubt that a bad hire is a costly proposition. It is often mentioned that a hiring mistake costs somewhere between 2-5 times the salary of the person hired. A study by the Society for Human Resources Management (SHRM), puts the figure at five times the annual salary. SHRM also found that the higher the person’s position and the longer they remain in that position, the more cost is associated with this bad hire. Many companies don’t resolve poor hires quickly which can escalate the costs.
What makes a bad hire so expensive?
In addition to direct costs including salary, benefits and hiring expenses, the indirect costs of a bad hire include items such as other employee turnover associated with having the bad hire in place, training time and resources spent to replace the candidate. There is also the “opportunity cost” of not having the right person in the role which can include lost sales and potential loss of customers.
What are the root cause issue associated with hiring mistakes? These mistakes typically fall into one of three baskets:
1. Poor skills match.
2. Not a good fit (intangibles.)
3. Misunderstanding expectations.
Other performance related issues can come into play, but taking steps to mitigate these three factors can greatly reduce your hiring mistakes.
8 Actions to Prevent Hiring Mistakes
1. FULLY IDENTIFY AND UNDERSTAND THE PROFILE OF THE SUCCESSFUL CANDIDATE.
Consider all factors that determine success. This includes motivation, character, emotional competency, fit with culture, personality and values etc. Too many times hiring managers are infatuated with a certain skill or experience aspect and lose sight of other critical requirements.
2. INTERVIEW FOR DESIRED INTANGIBLES.
It is easy to get very focused on behavioral interview questions developed from the job description and key requirements of the position. Success also results from a person’s drive, willingness to take good risks, deal effectively with people, fit well within their environment etc. Interview questions should be designed to successfully evaluate all aspects of the candidate that will impact performance.
3. EVALUATE THE POTENTIAL CANDIDATE AGAINST GOALS AND EXPECTATIONS, NOT JOB DESCRIPTIONS.
The creation of a list of desired accomplishments, expectations and projects to complete will serve you in three ways. 1. Allow you to develop questions and evaluate the candidate against actual expectations. 2. Create the right expectation with the candidate. 3. Give a good start to the critical on-boarding plan.
4. GATHER FEEDBACK AND LISTEN.
Even the best talent agents have blind spots. Be thoughtful about all the individuals involved in the process and gather feedback from these stakeholders as part of the decision making process. Better decisions result when the decision maker is listening to those around them.
5. RED FLAGS SHOULD NEVER BE IGNORED OR DISCOUNTED.
Learn to read basic signals that a candidate might be sending. For example, if the candidate is not responsive or slow to respond during the hiring process consider this a message. Either they are not very interested in the job or they are not likely to ever be responsive. Every candidate tells a non-verbal story. This is every bit as important as the actual interview as they are glimpses of the person that you are potentially committing to hire. Consider a meeting with the candidate in a less formal setting such as a meal to observe their behavior.
6. ASK THE CANDIDATE TO MAKE A PRESENTATION.
This can either be a response to a set of questions or a specific problem. Alternatively, leave it to the candidate to present what they want to communicate about themselves as a candidate for the position. This gives you a look at the quality of their work and a glimpse of how they might perform in a work situation.
7. USE AN ASSESSMENT AS A FINAL STEP TO PROVIDE ADDITIONAL AFFIRMATION.
The right assessment will help you further understand the candidate. The five data points to consider when making sure you have the right candidate include: 1. Experience fit with role and related track record. 2. Interview answers and feedback (tangible and intangible.) 3. References (yes you can get good information from a reference check.) 4. Assessment. 5. Candidate interest level and motivation. These five factors together present the whole picture. While the “Perfect” candidate may not exist, you will have a much fuller picture of the candidate by consistently taking all of these factors into consideration.
8. CREATE AN EFFECTIVE ON-BOARDING OR “INTEGRATION” PLAN.
Many employers feel onboarding is something the human resources area does. In reality, effective onboarding sets the person on the right path and helps ensure they are fully equipped to navigate complex relationships and a new set of company behaviors. Getting off on the wrong foot can be difficult to overcome. Make sure the candidate fully understands your expectations. As an example, are they expected to listen, learn and build relationships or deliver specific results in the first six months? Build bridges between the new person and key internal stake holders. This might include introductions or participating in initial meetings. Time spent on these integrations will pay dividends increasing effectiveness and potentially preventing disconnects that may lead to early turnover.