The true cost of a bad hire It’s much more than many employers realize
IT’S no secret there have recently been some very high profile and very public management departures from local and national organizations as well as suspensions for perceived unethical expense claims by a group of senators recruited by their preferred political party. To be honest, if readers had the opportunity to examine any of these situations carefully, they would more than likely find that many of these departures can be traced back to poor recruitment and hiring decisions. In other words, the wrong people in the wrong job.
And not only do situations such as these cause public relations nightmares, they cost dollars and cents. For instance, as we have recently seen, the departure of a senior civic official can cost the organization upwards of $400,000. Yet, that doesn’t include any behind the scenes financial fallout from earlier internal staffing shuffles, a decline in morale and productivity, resignations and departures from disgruntled staff that wouldn’t be calculated in any final payout for a departing leader. And, it wouldn’t include costs such as continued pension and/or health care benefits sometimes awarded to the departing individual for a period of time.
However, on average, the cost of termination for any employee in any organization can range from three- to five-times annual salary with costs increasing as the level of personnel reaches senior levels. This includes costs for severance, organizational time to recruit a replacement, recruitment and selection expenses such as advertising, candidate travel and selection committee hours, candidate training and orientation and, perhaps, moving expenses.
While there are significant cost implications related to recruitment and selection, organizational leaders need to be cautious to avoid the following hiring mistakes.
Lack of job role analysis and update — mistakes are often made by rushing to replace an incumbent without assessing the challenges previously encountered and assessing the strategic direction of the organization. In many cases, the job description is not reviewed, goals and objectives are not defined and the selection criteria are not updated. The result will either be “same old, same old” and/or a new incumbent will be blindsided at their first performance review. All in all, failure to conduct a job analysis may well lead to another unsuccessful candidate situation.
Inadequate selection committee structure — many organizations lack strategy and consideration for the importance of selecting the best individuals to sit on a selection committee. For instance, if a committee member is too closely associated with a candidate, then others will perceive objectivity to be compromised, which in turn may impact the assessment of other committee members. In addition, committees often fail to confirm their mandate. In other words, who is making the final decision? Mistakes are often made when a senior decision maker not involved in the overall process, steps in and overrides committee recommendations.
Selection criteria are too vague — many organizations have created “competency profiles” which are all well and good but many of these profiles are too vague when translated into selection criteria. Unless the competencies are concrete and measurable, then interviewers have difficulty assessing candidates. The result? Poor candidate assessments and hiring mistakes.
Inadequate interviewer preparation — a lack of in-depth committee discussion prior to interviewing often leads to hiring mistakes. Committees fail to discuss which competencies are “must have” versus “nice to have,” they fail to weigh the various selection criteria and fail to determine the value and balance of cultural fit to the organization. Focusing too much on cultural fit versus skills and/or ignoring cultural fit versus technical skills will also lead to hiring mistakes.
Candidate screening process is weak — there are many steps required for a comprehensive selection process and skipping any of them can lead to hiring mistakes. For instance, failing to pre-screen candidate resumes leads to wasted time for the committee. On the other hand, failing to conduct telephone screening also wastes time and energy. When these steps are ignored, selection committee members often become very time pressured and fail to take the time needed for their in-depth interviews.
Weak interview questions — superficial questions that fail to dig deep into an individual’s experience result in poor assessments and hiring mistakes. Inquiries such as “tell me about yourself” are not linked to job duties or competencies, are too vague and thus a waste of time. If you can’t connect candidate interview responses to job skills, goals and objectives, then the candidate is not the right fit.
Failure to accurately assess experience — I strongly believe that life/work experience equals educational qualifications; however, I find that selection committee members often fail to accurately assess these credentials. For instance, an MBA does not necessarily trump 25 years hands-on business experience. At the same time, the distinct leadership expertise required for a sole business practice and/or a small organization versus a large bureaucratic organization is frequently ignored and/or discounted. To put it bluntly, mistakes are made when the needs of the organizational environment are not given careful consideration.
Raising high hopes for internal candidates — if you don’t intend to seriously consider an internal candidate, then I believe it’s a mistake to offer them a “courtesy” interview and get their hopes up. Be honest and inform the individual of your intentions. Disappointment causes resentment and ultimately this employee will leave. This internal turnover not only causes a loss of corporate knowledge but also creates the situation where you will now have two new employees facing a steep learning curve.
Over reliance on the interview process — a “one shot” interview process, especially for more senior organizational roles is inadequate and creates more hiring mistakes than not. If the interview strategy does not provide a candidate with a thorough review of the new job at hand and if the process does not allow the committee to assess candidates from a broad perspective, I guarantee mistakes will be made. Finally, failure to utilize psychometric assessments to facilitate a comparison to the interview results also often leads to the higher risk of a hiring mistake.
Cloning or halo syndrome — inexperienced selection committee members often fall into the trap of evaluating like-minded candidates higher than those that are different. This cloning syndrome or “halo effect” leads to perceived nepotism and results in hiring a candidate who may not be an independent thinker. On the other hand, a successful “clone” candidate may be too independent and ignores normal organizational processes without fear of reprisal.
Poor organizational recruitment and selection strategies that lead to hiring mistakes are costly both from a financial and a public relations point of view. On the other hand, candidates who were trapped within the complicated web of a hiring mistake also often unwittingly suffer significant consequences. In some cases, they may leave only with a bruised ego, but in other situations, their professional reputation can unfortunately be tarnished and can impede future employment.