Why Managers Can't Stop Making Bad Hiring Decisions
Employees are the most valuable assets of a company.
“When it comes to business success it’s all about people, people, people.”
- Richard Branson
Hiring the best, most talented workforce is vital to an organization’s success. But hiring the best talent is a challenging task for companies. Companies are making costly bad hiring decisions. Companies are making bad hiring decisions because hiring is a flawed process. This article will share five of the biggest flaws in the hiring process and what you can do to get good employees and avoid bad hires.
How Many Companies are Making Bad Hiring Decisions?
According to a survey by CareerBuilder, more than half of companies in the top ten world economies have been affected by a bad hire. That means all of these companies are making bad hiring decisions about their workforce.
- Russia – 88%
- Brazil – 87%
- China – 87%
- India – 84%
- U.S. – 66%
- Italy – 66%
- U.K. – 62%
- Japan – 59%
- Germany – 58%
- France – 53%
The global survey included more than 6,000 hiring managers and human resource professionals in countries with the largest gross domestic product. This isn’t a minor problem; bad hiring decisions are a massive problem.
But it doesn’t end there. What’s even more staggering are the costs associated with making a bad hiring decision.
The Unexpected Costs of a Bad Hire
"As a business owner or manager, you know that hiring the wrong person is the most costly mistake you can make."
- Brian Tracy
Most managers underestimate the cost of a bad hire because a single bad hire can cost you in so many unexpected ways:
Costs of a Bad Hire can Include:
- Wasted salary 1 to 6 months, 8.5% - 50% (As a percentage of annual salary);
- Recruitment costs and time, 5% - 40%;
- Training costs (and time), 5% - 20%;
- Impact on rest of team 5% - 50% and;
- Missed/ delayed business deliverables. Failures 0% - ?
So the total cost of a bad hire is probably a minimum of 25% of their salary but could be over one and a half times their annual cost. For example, say you are hiring someone at $80k – the range would be between $20k to over $120k. For more on this topic see our article on the Unexpected Costs of a Bad Hire.
Why are Bad Hiring Decisions so Common?
When the cost of a bad hiring decision is so high you have to wonder why so many managers are making bad hiring decisions. When you take a closer look at what’s wrong with hiring you begin to understand that it’s easier said than done.
1. Evaluating Job Candidates is Tricky
How can you be absolutely certain that you’re choosing the right person? A candidate can have a great resume and interview well. But post hire things go a little pear-shaped and you realize you made a bad hiring decision. The thing is:
- A lot of interview questions are theoretical constructs - that is to say someone can provide a good interview answer but not have the real world skills;
- Hiring is a significant investment. Interviewing provides little information for such a big decision and;
- Ironically weaker candidates have more practice at being interviewed.
Avoiding Bad Hires, Solution 1 – Better Candidate Evaluation
If you want to make sure you’re hiring the best person for the job then it all comes down to how you evaluate job candidates. The best evaluation comes from using the best interview questions.
The best interview questions aren’t a standard set of questions that you ask for every role. The best interview questions are matched to the job competencies for the specific role.
The best interview questions give you comprehensive insight into the person behind the resume. The best interview questions reveal the job candidate’s values; personality; strengths; weaknesses; knowledge; past behaviors; competencies and skills.
Wondering how to prepare an interview that assesses and evaluates all the above? It’s as simple as choosing the right combination of the best interview questions:
- Behavioral Interview Questions
- Values Based Interview Questions
- Interview Questions to Avoid Bad Hires
If you’re a manager who wants to hire better staff, we have a free Interview Question and Assessment Guide for you to download. Includes how to prepare an interview and choosing the best interview questions to ask job candidates.
2. Hiring Good Employees is an (Uncommon) Manager Skill
Most managers just wing the hiring process. Place a job advertisement; wait for the influx of resumes; choose a few candidates and use generic interview questions to evaluate candidates. But this is why companies are making bad hires.
The reality is that good hiring requires manager skills, practice and formal discipline. This is a challenge because:
- Managers are relatively inexperienced at hiring because it’s a Manager Skill they don’t practice very often and;
- Most managers aren’t formally trained in recruitment processes;
Combining a lack of manager training, practice and experience can only result in bad hiring decisions.
Avoiding Bad Hires, Solution 2 – Better Hiring Process, Better Manager Skills
So if you want to hire good staff and avoid bad hires then the solution is a better hiring process and manager skills. If you’re not convinced then look at great companies. What you’ll notice is that great companies place a strong emphasis on the hiring process.
Take former co-founder, chairman, and CEO of Apple Inc. Steve Jobs for example. He considered hiring the best employees to be your most important job. He considered it so important that he managed all of the hiring for his team; never delegating it. Steve Jobs personally interviewed over 5,000 applicants during his career. For more on this topic see Steve Jobs on Hiring.
Is it worth doing management training to improve your hiring skills? Well of course we’re going to say yes. Management training is the engine behind continuous improvement and employee productivity. But if the costs of a bad hire aren’t enough to persuade you then read our article on the Business Case for Manager Training.
3. Hiring is Time-Limited
Typically vacancies need to be filled quickly. An employee has just left leaving a gaping hole of responsibilities. Or perhaps budget was finally approved for a desperately needed, long outstanding role. Whatever the reason the hiring manager is feeling overwhelmed and willing to do anything to get help fast. But it takes time to filter job candidates. If you rush you run the risk of recruiting bad hires.
The next time you’re in the predicament of having to hire quickly, stop for a moment and consider the advice from the late Steve Jobs (former co-founder, chairman, and CEO of Apple Inc.).
“Assume you're by yourself in a start-up and you want a partner. You'd take a lot of time finding the partner, right? He would be half of your company. Why should you take any less time finding a third of your company or a fourth of your company or a fifth of your company? When you're in a start-up, the first ten people will determine whether the company succeeds or not. Each is 10% of the company. So why wouldn't you take as much time as necessary to find all the A-players? If three were not so great, why would you want a company where 30% of your people are not so great? A small company depends on great people much more than a big company does.”
Avoiding Bad Hires, Solution 3 – Don’t Take Hiring Shortcuts Use an Efficient Process
Take the time you need to avoid a bad hiring decision. Stick to a good recruitment process. Shortcuts in the recruitment process will catch you later. The solution is to use an efficient and effective hiring process. Knowing what is important for the job will allow you to quickly eliminate weak candidates.
4. The Recruitment Process Doesn’t End with Signing the Contract
Signing the employment contract isn’t the end of the recruitment process, it’s the beginning of the boss - employee relationship. Many bad hires don’t start off as bad hires. Bad hires become bad hires when they fail to integrate or be engaged.
Avoiding Bad Hires, Solution 4 – Onboard Employees for Performance:
You only get one chance to make a first impression. Integrating and engaging employees isn’t a company induction program, it’s a manager responsibility. (Related: Why your new star hire will leave you. Read here)
5. It’s Bad When a New Hire Leaves But it’s Worse When a Bad Hire Sticks Around
Because of the problems with hiring, even experienced managers with good hiring practices will make the occasional bad hiring decision. In this case the bigger problem is how you manage the risk when it doesn’t work out. Many managers don’t deal with bad hires because they think it’s difficult to fix or they think that an underperforming employee is better than no employee. This is like thinking a flat tire is too difficult to pump up or replace.
Avoiding Bad Hires, Solution 5 – Face up to Employee Underperformance
You could make lot’s of bad hiring decisions but still end up with a high performing super-star team if you fixed all of your bad hires.
Zappos CEO Tony Hsieh favours hiring slowly and firing quickly. According to Hsieh, his past bad hires have cost his company “well over $100 million.” Hseih has an interesting solution. Zappos offers new hires $3000.00 to leave the company. Their philosophy is that those who accept the offer are clearly a bad hire because they’re not committed to the Zappos values and culture. By removing an employee who doesn’t want to be a part of their organization, Zappos saves on future hassles, headaches and termination costs that far exceed the money paid to the employee.
Read more about The Bizarre Hiring Practices of Zappos here
What’s Wrong With Hiring Conclusion:
There is so much that can go wrong with the hiring process that it’s no surprise more than half of companies are making bad hires. Making a bad hire is costly and painful mistake. To avoid bad hires:
- Improve manager skills and implement a good hiring process. (The Boss Camp program will show you what they didn't teach you in school about managing employees.)
- Use good interview questions to split the field between those that talk a good game and those that have real experience.
- Avoid the temptation to hire the first warm body.
- Manage employee performance with employee onboarding and deal with underperformers.
Is there anything you do make the hiring process better - what are your best tips to get the best employees? Help the rest of us out by sharing in the comments below.
The Hiring and Interviewing Series
This is part of the Interviewing and Hiring Series. This series covers how managers can increase employee performance through hiring better employees. And how managers can avoid common hiring mistakes.
Topics in the Series Include:
Other Relevant Resources:
Power Interview Pack: The complete set of interview questions to get the best candidate for the job. Increase employee performance through hiring the best staff and avoiding bad hires. Link here.
Hiring for Performance: How to hire the best employees and improve employee performance, engagement and retention. Link here.
Employee Onboarding for Performance: If employee onboarding goes wrong, your new hire may leave you in the lurch or become a demotivated low performer. But motivate and integrate your new hire well and you will have a happy, productive team member. Link here.
Did you know that studies show that more than half of people don’t like their jobs. Now imagine how hard managing them is. As a boss this is the challenge you face every day. Find out how to make managing easy at WWW.BOSS.CAMP. The program includes topics such as:
- How to hire for performance
- How to motivate employees,
- What are bad employee motivators,
- What you must do as a manager but isn't on your job description,
- How leaders get power.