SAMUEL ZAREMBSKI

By SAMUEL ZAREMBSKI

The Hidden Costs of a Bad Hire

Genius, loyal, driven, these are some of the words you use for a Rockstar employee. We all have them, the people who seem to tick all the right boxes. Maybe it’s the little things they do that makes the difference, or perhaps it’s their larger than life character that sets them aside from the rest. Whatever it is, it’s easy to spot an A player at work as they tend to be the foundations of any successful institution. The legendary entrepreneur Steve Jobs wouldn’t tolerate anything less than the ‘cream of the cream’ and advised: “A small team of A+ players could run circles around a giant team of B and C players.”  

Great advice, but what happens when honest intentions still lead you to a bad hire? How does this affect your company? And what action can you take to avoid future renditions? In this short article, we’ll uncover the grave outgrowths a poor hire can cause – especially for small to medium-size business – and how you can ensure your next recruit is the ‘A player’ you need.

Bad Hires in Numbers

Let’s start by crunching some numbers. According to the ‘Office of National Statistics’, the number of hires made between Jan-Mar 2017 was 1,864,700 – so roughly 7.5 million for the year – an enormous portion when you consider the entire UK workforce is only 31.95 million. That’s an immense influx of workers facing new job roles. According to a study by Leadership IQ, 46% of newly hired employees will fail within 18 months, while only 19% will achieve evident success. That means less than 1 in 5 of hires will meet expectations, and almost half will have a disruptive impact – and not in the positive entrepreneurial sense of the word.

Defining a Bad Hire

Okay, we should be cautious be when hiring, but most are, so where are so many going wrong? Perhaps by looking at the main symptoms of a bad hire, we can uncover the route cause. Fortunately, there’s some fantastic research into this area; a study of 5,247 interviews categorised and distilled the top five reasons why new hires failed:

• Coachability (26%): The ability to accept and implement feedback from bosses, colleagues, customers and others.

• Emotional Intelligence (23%): The ability to understand and manage one’s own emotions, and accurately assess other’s feelings.

• Motivation (17%): Sufficient drive to achieve one’s full potential and excel in the job.

• Temperament (15%): Attitude and personality suited to the particular situation and work environment.

• Technical Competence (11%): Functional or technical skills required to do the job.

 If you were asked to assign ‘experience’, as a trait, to one of the factors above which would you choose? ‘Technical Competence’ would likely be your first choice. An intriguing insight considering so many emphasise the importance of experience in the hiring process. What they should be highlighting is the potential expense a future employee could cost the company.

bad hiring

Financial Costs of a Bad Hire

A striking opinion is that of Tony Hsieh, the CEO of Zappos; “One bad hire can lead to a domino effect of more bad hires and decisions costing a company millions.” When pushed for a figure, he estimated it had cost his own company “well over $100 million.” A disconcerting statement especially when considering ‘The Recruitment & Employment Confederation (REC)’ announced that 85 per cent of HR decision-makers admit their organisation has made a bad hire, in a 2017 press release. They went on to estimate a poor hire at the mid-manager level with a salary of £42,000 can cost a business more than £132,000. But how can one employee come at such a pricey detriment?

Hidden Costs

It comes down to the hidden costs and returns on investment. When you begin to consider the money wasted on training, inefficient time management, and increased staff turnover, it starts opening up unwanted doors. A potential insidious side-effect of a bad hire is loss of productivity, not only in the culprit but their outward effect on others. Entrepreneur and Forbes writer Falon Fatemi describes it as an infection.

Urging the impact on team morale is worse than monetary cost, "contagious it begins to affect work ethic of others, productivity, enthusiasm, engagement." Once it spreads, the pernicious ripples reach other departments, customers, and even partners, which could ultimately influence the reputation of a business.

The Betterteam Blog (2017) found that 50% of candidates say they wouldn’t work for a company with a bad reputation – even for a pay increase. We, therefore, have a vicious cycle in which negative hires stop productive future hires, leading to more desperate appointments. It begs the question; what can we do to prevent these mismatches and ensure we get our ‘A player’?

The Route Cause

First, we should look to dig the seed before it has a chance to grow and spread its routes. Easy said than done. However, a report by careerbuilder.com unearthed some secrets that could help give you the answer your business needs, after speaking with HR representatives who had experience hiring detrimental team members:

• While the candidate didn’t have all the needed skills, thought they could learn quickly: 35%

• Candidate lied about his/her qualifications: 33%

• Took a chance on a nice person: 32%

• Pressured to fill the role quickly: 30%

• Had a hard time finding qualified candidates: 29%

• Focused on skills and not attitude: 29%

• Ignored some of the warning signs: 25%

• Lacked adequate tools to find the right person: 10%

• Didn’t do a complete background check: 10%

• Didn’t work close enough with HR: 7%

Although a few of these seem hard to avoid, most can be eliminated through an improved hiring procedure. One factor, AL Solutions always manage our candidate’s expectation against the clients. Whether this is flexible hours, money, or recognition excavating the motivations of both parties can ensure the match is a win-win. We believe company culture is a remarkable way of distinguishing whether the pairing will go the distance.

For example: Take a 25-year-old programmer who has always enjoyed their personal space and finds they are most productive when working alone but also have fun socialising and meeting new people. As a recruiter, I would introduce him/her to a client who allowed remote working; however, it holds regular social events and promotes cross-contamination between departments. When you start factoring in these intricacies, you’ll find many of the points above begin to get accounted for, in a counter-active virtuous cycle.

The Answers

Another consideration to defend yourself against myopic hiring is the acknowledgement of soft skills. LinkedIn Global Talent Trend found that 89% of talent pros say bad hires are due to lack of soft skills. It’s essential to consider the broader picture, not just experience but vision and values. Have an idea for your recruitment strategy and ensure a clear and consistent process – something easy to replicate and that can be split test (AB Test) to find improvements. Alongside LinkedIn Global Recruiting Trends (2017) saw these are the future of trends of recruitment:

• More Diverse Candidates – 37%

• Focus on Soft Skills Assessment – 35%

• Investment in Innovative Interviewing Tools – 34%

• Company Mission Used as a Differentiator – 33%

• Big Data – 29% 

AL Solutions is particularly fond of diversity in the workplace, and we weren’t surprised to see a study by McKinsey (2015) show ethnically diverse companies are 35% more likely to have a financial performance above the industry mean. We also use a smart algorithm to guarantee that our hires are far more successful than the mean. Something we’ll be sure to share with all our partnering clients.

Summary

So what will you do to ensure your next hire is an A player? We advise being prudent and considering modernising your approach: Although experience is a necessity, make sure to factor in soft skills, alignment to company culture and diversity, amongst other finer details when interviewing candidates. One final tip, if you’re not sure, is to ask an outside opinion from a different department, they’ll likely see something you miss. Using these actions, you’ll be well on your way to getting the ‘cream of the cream’.