Counting the cost of hiring badly
It comes as no shock to savvy businesspeople that poor recruitment costs. It costs time, money, training, productivity losses, inconvenience and … stress and aggravation!
Employing incorrectly costs more than most would realise and few companies acknowledge. Added to this, what is rarely considered by business are the loss of clients, customers and other valuable employees.
The Society for Executive Wisdom (http://www.executivewisdomsociety.com) has done extensive research throughout Australia, and the results will astound even the most cynical of CEOs and Human Resource Directors. The research compiled depicts a startling picture for the business world.
The preponderance of organisations surveyed believed that with the privilege of hindsight, they could assuredly declare that more than 50% of the time, they hired the wrong person. Further perpetuating the problem is the behaviour of decision-makers in that, even after the awareness of the incorrect recruitment decision, CEOs and HR are nervous, unwilling and some admitted to being afraid to terminate their employment. Some respondents admitting it was almost impossible to build up the nerve to call ‘game over.’
What is failing to be acknowledged and understood in this scenario is that keeping the wrong person will make your business and your working life miserable. Those surveyed added that in their estimations it added considerable time and cost burdens upon the business, the employees and the customers.
The Society for Executive Wisdom therefore decided to further explore the ramifications and attempt to realistically, and conservatively quantify these cost factors in the doom-loop of mis-hiring. In using the term, ‘cost’ we include time, money, resources, emotions, stress, teamwork, productivity and more.
In evaluating the total dynamic, take into account the following:
- Costs involved in initially identifying the candidate. Time of those responsible for and in the hiring process; lost productivity of those involved, for whom recruiting is not their full-time role within the organisation and monetary investments made in advertising, recruitment company fees, testing for skill application and verifying qualifications and references.
- The time involved for interviews, reference checking, skills assessment followed by second and third interviews, in-house discussions and assessments, administrative functions of follow up calls, the formal offer both in writing and orally and finally meeting to close the agreement of employment.
- Costs of induction and establishment. Research survey respondents explained their dismay and confusion around the costs of putting a new person into their business, which initially goes unconsidered. Depending on the type of business and the specific roles, examples provided included: additional software license agreements, mobile phone handsets, uniforms, security card passes, industry association membership fees, IT costs associated with hardware, software and email, and more.
- How things are done around here! The time invested by many in training new recruits in how the business operates.
Many may genuinely claim that there has been little to nothing that is new or unexpected depending on the sophistication, maturity or depth of knowledge by those hiring. Consider this …
- What about the work you did not, or were not able to do, the results you did not achieve, the strategies you did not develop, because you were reviewing resumes, interviewing potential candidates, interviewing those who made the short-list, telephoning references, and so on.
- The opportunities, strategies, relationships, client interactions, you missed whilst focused on having your new team member inducted, introduced and acclimatised into the group, brought up to speed and engaged into the indoctrination of your business.
- The stress and additional effort you had to produce after they resigned and you were the one who had to double up just to get back on an even keel again.
- Productivity loss exacerbated by needing to recommence the whole process once again. And, will the next person you hire ultimately be the right one?
- The intellectual property they learned and left with, and possibly share with one of your competitors.
One of the CEOs who contributed to the research had a rather confronting account of her experience in recruiting a Sales Manager:
“The initial process of recruiting the Sales Manager took longer than expected due to the current low unemployment rates. We finally settled on an agreement with a person after a process that was eleven weeks. Understandably, we assumed it would take some time for the person to settle into the role, review our business model, learn about our products and services better, and build relationships with the sales team and our key clients. In essence, this was almost three months. When calculating all the costs, including ‘lost opportunity,’ this was quite an expensive exercise.
Then only five months after appointing the Sales Manager, he resigned. During the fallout after his departure, it was apparent that had he not resigned when he did, it would not have been too much longer before we would have let him go ourselves. The kicker in all this was to then restart the entire procedure once again. We are now certain we do have the right person, doing the right job in the right way. The scary part? My rough calculations quantified this recruit as a $260,000 outlay to get to where we are today. And that is a non-recoupable expense!”
Underpinning this analysis is the unarguable fact of interpersonal relationships and the effect they can have on your business. The new hire makes friends with your existing team, develops relationships with your customers and suppliers, and so you become hesitant to dismiss them because you do not want to send any wrong signals to your internal and external stakeholders.
Comfort is the curse of mediocrity. And that is the malady respondents to the survey suffered. Many explained they had become reliant upon the person, even though they inherently knew the new hire was the wrong person for the business. “We got comfortable with her and became trapped in the long-run,” commented the General Manager of a professional services firm.
Keys on how to avoid mis-hires!
- Do not necessarily believe that hiring someone ‘just like you’ is a good idea. This may lead to conflicts in personality. What at first seems charming and flattering becomes annoying and aggravating; and they may be seeking to rise to your position. Whether that be a manager or business owner. Finally, if they do think like you, you are gaining no new fresh thinking and objective thought. No credits to the intellectual pool have been deposited.
- This key made the list based upon feedback during the research … don’t hire somebody who ‘needs a job.’ Yes, strange as it may seem, some genuinely caring decision-makers will actually offer or create a job for people who they know who ‘need’ a job. By no means should we become heartless and uncaring; but when you are attempting to grow your business, it is deleterious to have in your employ, people who are shy of the mark. Whether it is skills, attitude, intellect or motivation.
- Do not employ relatives. The caveat being, if you and your relative have 15 years of strong and successful business experience combined with emotional maturity and healthy personal boundaries then go for it. Other than that … too much can go wrong.
- Do not employ somebody who you want to help. If you want to be a philanthropist and contribute to your community, hire the very best people you can, grow a strong and successful business, earn an abundance of money, and then contribute in whatever ways you desire, directly.
There is a very good reason why the air stewardess tells you to place the oxygen mask on your own face before helping loved ones; you have to help yourself to be able to help others. The mistakes made in mis-hiring are creating friction, loss, conflict and aggravation both externally and within.
When hiring for new personnel seek out those who have natural talent, high aspirations, high expectations of themselves, significant pride in developing themselves to achieve excellence, firm persistence and determination. This requires intelligent and thoughtful behavioural-based questioning techniques. Not psychometric or personality tests, the majority of which are flawed for use in the workplace, recruitment and employment. Psychometric and personality testing to be valid need to have construct, content and concurrent validity. Hardly any of the most popular tests pass this level of validation, let alone the fact that the tests must also be referenced in legitimate psychological and psychiatric journals.
If your organisation is not using behavioural interviewing techniques, invest in learning and developing the required skills immediately. This is the only appropriate way to attain honest, reliable and valuable information, to ensure you are hiring correctly and not employing future grief and cost.
Executive Wisdom Consulting Group (http://www.executivewisdom.com) will be facilitating business workshop and programs around Australia to explain and educate further how to improve your hiring techniques. But whichever path you choose to follow to acquire the necessary skills … be certain to do it and do it quickly.
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