What is the costliest mistake you can make for your business? You may be thinking about your product, quality or customer issues – and you might be right that mistakes in those areas can be costly. But, the number one mistake on the list is poor hiring.
Why Poor Hiring Can Be Costly
A poor hire can create an avalanche of costly issues in your business. Here are just some of the implications of a poor hire:
- Replacing a bad hire. It takes time and money to post ads, interview, select and on-board a replacement.
- Lost opportunities of not having a good hire in place. We are talking about impacts ranging from that bad hire not showing up, not doing quality work, missing deadlines, not meeting customer expectations, and requiring more supervision than should be needed. This is especially damaging if that bad hire is a manager. Who is doing the work they are supposed to do? Who is cleaning up the mess? Likely it’s you!
- Worst-case hire is a damaging hire. An employee who is actually sabotaging your organization, especially if they are in a customer-facing role.
- Emotional toll of removing a bad hire. Have you ever had to try to correct the performance of a bad hire? Have you ever had to fire someone? How does a bad hire impact your other employees? Do they have to cover for him or her? Do they question your judgment?
- Finally, it creates some legal risk for you. Although the chances are slim that this would happen, firing someone can open the door to a discrimination charge or other legal issue, especially if they are in a protected class. And, almost everyone is in some type of protected class from a discrimination standpoint. In California, there are 13 defined classes of protected employees.
Estimated Costs of a Bad Hire
The costs of a bad hire add up quickly. Estimates start at around $25K in recruiting and time-to-productivity costs to bring in a lower level employee. On the higher end, estimates go up to $840,000 for a second level manager making $62,000 a year in salary, and terminated after 2 ½ years due to performance. This includes hiring costs, total compensation, severance costs, disruption costs, mistakes, failures, and missed opportunities by the individual and the team.
Why Do New Hires Fail?
The list of issues that cause new hires to fail is relatively short – most could be identified and avoided with an effective hiring process. The following is a list from Fast Company of the most common characteristics in order of most common:
- Failure to work well with other employees (63%)
- Failure to produce quality work (63%)
- Negative attitudes (62%)
- Immediate problems with attendance (56%)
- Employee caused customer complaints (49%)
- Failure to meet deadlines (49%)
My Number One Recommendation for Making a Great Hire?
You absolutely need to invest time and energy into the hiring process. If you shortchange the process, you shortchange your results. Too often, I am brought into situations where hiring was done with little planning and poor execution. When I ask how the bad hiring decision was made, I usually hear one of the following:
- I really liked him/her. We really hit it off.
- They seemed like a great fit.
Use a Performance-Based Hiring Process
I am a big fan of Lou Adler’s performance based hiring process. The premise is that you hire based on the candidate’s past performance. This is seems like a no-brainer, but here are some of the basics:
- Invest up-front in defining specifics of what a top performer would accomplish in 6 months or a year. Define their key characteristics, motivations, and the organization’s culture.
- Look for top candidates who aren’t in an active job search. Leverage your accomplishments lists to identify candidates.
- When you interview the top candidates, ask them to describe their own accomplishments that are similar to what you need in your job. Look for very specific results – think numbers, dates, etc. Then ask them ‘how’ they did it. Who was involved, what process did they use, what was the culture like, what were the challenges, what they learned, what motivated them, who helped them and so forth. It is very hard to BS your way through the specifics and all of the follow up questions of ‘how’.
- Motivation is key to employee engagement. Make sure you understand what motivates the candidates to achieve great results.
- Involve others who will regularly interact with the hire. Require them to understand the position and to prepare their questions per the above performance-based process.
- Make a fact-based decision. Too often, interviewers are heavily biased by the first 20 seconds of interaction with candidates – that first impression. Set that aside during the interview process and make sure it is balanced during your decision.
- Follow up with previous managers and references. Contrary to popular opinion, others will often talk to you about your top candidate – especially if they think highly of them. Be wary if they don’t call you back.
Final Step – Convince That Motivated, Top Performer to Work for You
The focus of this post up until now has been on why you need great hires, and how to find them. Your final challenge is getting them to say yes! Share how you manage your employees, your team, and your organization. If you convey your belief that employee engagement and well-being is important to you, candidates who are enthusiastic, high performers are going to want to work for you. They should hear that from other employees and not just you. Your ‘great-place-to-work’ environment will help convince your candidate to accept your offer. Congratulations!
If there is one thing I would like you to remember, it is that you are only as good as your employees. Take the time and invest in hiring right the first time!
Next week, we will discuss how you manage the performance of your new hire and others on your team.