The Cost of a Bad Hire: How to Actually Do Something About it

John Sullivan wrote about the cost of a bad hire. Reading through the list, I thought it was extremely comprehensive … someone must have done their homework.

Sure, we should plan ahead, forecast hiring trends, and develop candidate pools. This is just good business sense. But, assuming hiring managers and staffing folks are doing the best they can, that is not enough. If we do not abandon old ways of thinking and adopt new tools, articles like this will continue into the future. Let me begin by restating a few obvious facts:

  • Interviews range from highly structured to ROTFL. Although they get better with structure, interviews are still tests.
  • Job requirements are almost always taken from an old position description. Questions are delivered orally and answers are delivered orally. Scores are almost always based on personal opinion.
  • In the end, interviewers usually compare candidates with each other instead of to the job.
  • No one intentionally hires someone who cannot do what was expected.
  • People promoted based on performance as individual contributors seldom become good managers.
  • A poor hiring program leads to a shallow promotion pool.

If sports franchises used organizational hiring practices to hire players, they would hire golfers, send them to soccer workshops, manage them as if they were fly fishermen, and reward them based on their ability to play badminton.

We can cite more facts, but the obvious question is not whether or not we should do a better job hiring and measuring candidates, but how can we start doing it?

Think Outside the Box

There is an old training problem where people are asked to connect 16 dots arranged 4X4. They are told to use only four straight lines and to keep the pencil on the paper at all times. The task is impossible without going outside the box; so is fixing the low-performer problem. Going outside the box with employment means: 1) doing a better job defining how a job is to be done; 2) using tests that measure “hows”; and, 3) following up on specifics. And, guess what? The good part is that’s what the Feds want you to do anyway!

Clear the Competency Cobwebs

Start by tossing-out junk competency definitions. Unless the old job is exactly like the new one, the only competencies that reliably can be used to bridge skills from one job to the next are technical knowledge, cognitive abilities, planning skills, behaviors, and motivations. I’ll leave physical skills for another article. In short, you need to know if the employee is smart enough to solve problems in the new job, knows the right things, can effectively plan and organize work, has the right interpersonal skills, and wants to do what’s required. It’s really so basic that some people have trouble understanding it.

You see, asking about results is the part that gets our attention. Asking “what have you done” is much easier than asking “how did you do it?” And, asking “how did you do it?” is easier than knowing if the candidate is telling you the truth. And so it goes. Even while our human nature keeps telling us how important it is to get to know the candidate, our job responsibility is to get to know whether the person has the skills to do the job. I know I don’t have to cite examples. We all have an abundance of them.

Start by understanding how a job should be accomplished. That is the secret of what you are looking for. And, while you are at it, ask a few people who actually do the job. You would be surprised at what you can learn.

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Master Your Tools

Interviews are quick, flexible, cheap … and inaccurate. If they are the only tools you use, abandon any idea that you can improve hiring quality. It will save a lot of frustration. Of course, adding structure to your questions without adding job analyses data or standardized scoring may make you sound more professional, but not knowing what to probe for or how to evaluate it will still fall short of your goals. Get to know as much as you can about hard-to-fake tests such as simulations and ability-type tests. If you don’t know how to use them, learn.

Avoid the Junk

I really feel sorry for someone who seriously attempts to navigate today’s test market. It is filled with so much junk and misleading information that it is almost impossible to make a well-informed decision. In general, avoid any test that claims it is approved by the EEOC, does not have adverse impact, states it can “help” you make the right hiring decision, has special occupational norms, and so forth. These are red flags. Even if you don’t get sued for hiring discrimination, you won’t be so lucky defending a wrongful termination charge or an internal discrimination challenge. Of course, there are all those bad-employee expenses that John Sullivan cited in his article.

Playing the Odds

Every hire is a gamble, and no system is perfect. Your only choice includes whether to continue using non-predictive interview techniques or learn better processes that screen out a greater percentage of unskilled employees. This is called validation. Nothing in the organization’s arsenal delivers the same ROI as a good hiring system. Just imagine instead of having a typical organization staffed with 20% top producers, 20% bottom, and the rest in the middle, what it would be like having 70-80% top producers.

Of course, you could always continue complaining about the high cost of low performance.


9 Comments on “The Cost of a Bad Hire: How to Actually Do Something About it

  1. As are by now traditional, my qualifiers: 1) people work in groups and group dynamics won’t be measured/assessed by current predictive hiring methods (also small group bonds are known as the very most powerful motivators) 2) people change vastly when exposed to different leadership and conditions, and predictive hiring will not assess the degree of potential change 3) organizations do not operate in static environments, and predictive hiring does not anticipate conditions when the outer environment changes 4) pro-forma fantasy about how productive things would be if all nine players were Babe Ruth also fails to reflect the dynamic patterns of performance: you can’t have 10 number one salespeople, even if they are all the very best available. 5) None of this is to minimize the very real advantages of careful hiring using factors related to the job and avoiding human fallacy and perceptual error in making choices.

    Finally: lots of things will deliver ROI equal to a good hiring system- superior products, protected markets, rent-seeking, political action money spread around, innovation incubation and support, low-cost production planning, etc. WW, you also have disliked sports team analogies in the past- suprised to see you use one !

    Beadle Out.

  2. Thanks for the article. Here are some things to add to the list:

    1) Measure hiring costs over the actual time it takes for someone to not be considered a “bad hire.” Why assign bad to the hiring process if things turned after initial expectations had been set? That’s why cars receive initial quality ratings and long-term quality ratings. It’s also why some carmakers don’t overemphasize initial quality ratings when they know ligh long-term quality and value ratings is what most buyers really desire.

    2) Don’t just fix the job descriptions – fix and tie-in the whole new hire objectives establishment and performance management processes. A midsize family sedan feels and operates with more real and perceived performance right after it’s purchased, but within 90 days owners begin to report problems. And often the problems are related to the car being driven and maintained differently than the maker suggests. Is the car at fault or the driver’s pedal- and brake-to-floor driving? That driving might work for sports cars and a few select sedans, but that same driving will quickly break down the typical sedan. Makers cover this by outlining what they believe is “normal use and wear and tear,” and a perspective buyer only needs to ask to find out what’s covered. Why not have the same outlined expectations for people before they are hired?

    3) Re-think and perhaps even re-position hiring in the organization – it’s not a process that should be separated from talent management. In my career, I’ve only worked with one executive who understood and created this expectation. I was his HR support and a direct executive report, yet he always stood by my recommendation that the first step to effectively executing business is to always acquire, develop, and deploy people around business needs. By the way, his first executive team evaluation category was how effective were we at hiring, developing, and deploying talent. Far too often today, it works the other way around. There’s a “gap” that needs to be filled, and the hiring process is designed around filling the “gap.” While that might be necessary in some situations, it shouldn’t be the standard. Would you want your car mechanic to fix problem stopping issues by changing only the tires or just looking at the brakes? No, you want the whole braking and alignment system set up to work together. You also won’t have any luck trying to get replacement tires from tiremakers if they believe the issue is caused by improper maintenance.

    4) Stop the madness with turnover among those in charge of recruiting and hiring. Would you go to an auto repair shop that had a new mechanic looking at your car every time you needed maintenance? Then why expect that new recruiters and new hiring managers are always going to be the best at addressing hiring needs? Here’s the tough part – if it’s not possible to keep the same people involved, then it’s absolutely critical that the process be as 100% documented and foolproof as possible.

    5) Most companies should get help from an outside consultant who isn’t attached to their existing process and is willing to deconstruct existing practices and help clients build or rebuild something that actually works.

    It takes courage to be outside the box so the other piece of advice I’d give is to make sure there’s appropriate reward for taking a risk to dramtically change and improve the hiring process.

  3. I like Martin’s analysis, and would suggest an extension:
    Work to design robust organizations and internal systems that can thrive regardless of a bad hire: imagine that to have a company succeed, every hire had to be a superstar, and how vulnerable to disruption that would be. Now imagine an organization which was so strong that it could succeed without a large number of superstars. In other words: companies should work to minimize the number of indispensable people and minimize the effects of a non-perfect hire. Going back to the car analogy: much of current corporate hiring strategy is designed like a race car that will deliver fantastic performance if handled by the few people with phenomenal skills. Instead, we should work to design cars (organizations) that perform well with almost anyone at the wheel.

    Keith “Occasionally Thinks Inside the Box” Halperin

  4. OK…Where do I start? Let’s begin with an agreement on what we can and cannot control…in the case of making a hiring or promotion decision, we can only control whether or not our candidate has job skills. Once we have done that (which is light years ahead of where most organizations are), then we can worry about culture, management effects and so forth…these are entirely different issues.

    As far as having an organization with low job standards; well, I guess there is probably someplace where employees need not learn anything, make few important decisions, can behave anyway they like, have no need to organize their work, or where motivation is unimportant. I’d be anxious to hear the name of one of them?

    There’s a kid’s song that starts with a person needing water, it progresses to a bucket with a hole, a repair-straw, a dull knife, a dry sharpening wheel, and finally back to water. This is classic head-in-the-sand thinking…I recommend a solution, and someone in the business explains why it cannot happen. Is it any wonder why executives have such little respect for the profession?

  5. Keith I like your notion too – reminds me of the US Army in the draft days; they did not know what they were going to get and had to make the best of it. The all-volunteer force is no doubt ‘better’ in a lot of ways, but it loses a lot too in terms of diversity (social class and education) and flexibility (entrenched monoculture).

    WW nobody goes out and hires at random, but hiring misfit toys can be a good counter-value strategy in some cases…..

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