The Cost of Poor Hiring Decisions

Posted by Lorna O'Brien on 10 April 2013

 

The cost implications of recruiting the wrong person are extremely high: recruiting costs a company approximately 17% of the annual Cost to Company of the employee, plus the cost of time spent interviewing the candidate and then the cost of making them redundant.  Add on the internal time taken to cover the assessment of the poor hire and decision-making over an exit strategy –which is often expensive senior-level time. This is even more critical in small businesses, where senior management time is business critical. Once the bad hire has been resolved, the recruitment process has to be repeated, incurring more cost and internal time. Any training and development spending on the outgoing employee will also be lost.

 In terms of other costs to the business, it is easier to see the cost of hiring the wrong person if they are revenue generating, as you can compare their performance to the rest of the team. In Admin/Support, the cost can be less easy to identify and is related to lost opportunities either to develop the business or to save costs. Wrongful dismissals can also be costly at the Labour Court or CCMA.

This is why it is even more important to invest in the recruitment process up front – much like doing extensive and high quality due diligence before a business deal. Not only does employing the wrong person have serious financial implications, but it can also have an impact on the organization as a whole.

A spate of leavers from a team often follows from a bad hire if the personality fit is wrong. This can do long term damage to the morale of the team or business.

Hiring the Right Candidate Takes Time

The most important asset any business or any organization has is its people. That holds true whether you have a small company or manage a department within a business employing hundreds or even thousands. Taking short-cuts to build your team may ease immediate growing pains but create regrets in the long-term.

The key is to understand that hiring the right candidate takes time, so be patient, develop a comprehensive hiring plan and execute it flawlessly. Remember, no hire is better than a bad hire.

Cultural Misfit

Another reason someone may not work out is due to what’s called the “cultural misfit.” This can occur when a candidate, who seemed perfect on nearly every level, clashes with the organization’s culture, which is why it’s critical that an open definition of the company’s culture exists in some form.” Specific questions should be part of the interview process to determine whether the candidate will fit within the firm’s culture.

Many hiring managers make the mistake of choosing someone based on an instinctual “gut feeling” or because they “liked” a particular candidate, only to find out later that the candidate was completely ineffective for the position for which he or she was hired. Time and again, we’ve heard statements like, “We shared a common interest in mountain biking so we hired her.”

How Companies Can Avoid Hiring the Wrong Person

Working with a recruitment business who takes the time to understand your business, culture and expectations can help hiring managers identify job candidates with the appropriate skills.

The key to a successful hiring process, is to provide a clear definition of responsibilities for the job as well as the personality characteristics required for communication and success. It’s also important to determine in advance, which employees will be involved in interviews, how information is collected and interpreted about the interviews, and ultimately who has the authority to make the hire.

You can’t just match keywords on a job description and expect a perfect hire, in fact, there are many times when the role is further defined during the interview process and job definitions can evolve by expanding or being modified in some fashion.

Six Tips for Better Hires

1. Know what you want. Don’t recycle past job descriptions because chances are the role has changed. Take a fresh look at your needs and the skills you’d like to add to your team. A detailed job description will help reduce the number of CVs you receive from unqualified applicants.

2. Look for the intangibles. A candidate’s skill set isn’t limited to functional abilities – it also includes how well he or she works in a collaborative environment. Employers that don’t take soft skills such as leadership and communication into account may set themselves up for a bad match.

3. Make a personal connection. Hiring is more than just identifying a strong resume or profile – it involves having conversations with applicants to establish a rapport. Interviews, for example, allow you to delve deeper into an applicant’s qualifications while also assessing whether he or she is a fit for your corporate culture.

4. Use all your resources. Though you may have the final say, hiring should never be a solo effort. Take advantage of the tools available to you at your organization – for example, human resources can help with the job description, and your employees may be able to offer referrals.

5. Never offer after a first interview. This seems too easy for a candidate and they generally decline the offer.  Get them back in for a second and preferably third meeting to meet as many of the people they will be working with, get the team to “buy into” the hiring decision so that they support their new colleague in the first few tough months! 

6. Woo your top choices. In any economy, people in high-demand may have multiple job offers. You need to show them why they should choose your organization over a competitor. Sell the benefits of working with your firm, and offer a compensation package in line with – or ideally, above – market rates.

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