Successful businesses understand the importance of making the right hiring decisions. This is why companies spend an average of $3,300 per hire just on recruiting the right person. In fact, in the United States alone, it’s estimated that $72 billion a year is spent on recruiting and hiring. Yet even with all the time, money, and energy spent on finding the right hire, mistakes are still made, and these mistakes are costly.
Hiring the wrong person can result in astronomical costs for your company. Harvard Business Review estimates that 80 percent of turnover is due to bad hiring decisions. The cost of replacing an employee is estimated to be around one-fifth of their salary, so those costs mount quickly. But the consequences of a wrong hire go beyond turnover costs; there are also costs associated with a disrupted company culture, decreased work production, and potential loss of customers and revenue.
Bottom-line: Making the right hiring decision is crucial in establishing and keeping a company successful. Although companies know the importance of making the right hiring decision, they still make easily avoidable mistakes. By watching out for the following pitfalls, as well as taking these proactive steps, companies can decrease bad hiring decisions and save money over the long run.
Be Mindful of Your Ad
The first mistake leading to a bad hire often starts with a bad job advertisement. Companies make the mistake of posting a job ad that focuses on the skills needed for the position, including preferred degrees and certifications; this approach tends to attract more mediocre applicants. In fact, one study published in the Journal of Business and Psychology found that job ads emphasizing how the open position meets a candidate’s needs result in better hires than ads focusing on the skillset needed for the job.
To attract top talent, focus on what you can offer candidates. This goes beyond your typical 401(k) and vacation benefits. Highlight why a potential candidate should be excited about working for you. This could range from continued training and education, to the company game room where employees take breaks. Companies should reflect on what makes their place of employment special and highlight those qualities in their job postings. Top candidates can afford to be selective, so these incentives are the first step to attracting the right hire.
More often than not, a bad hiring decision will be made because an employer feels desperate to fill an open position. Perhaps the right candidate is hard to find, so those “okay” candidates seem good enough, even if they don’t meet all your requirements. Be careful: Quick and desperate decisions lead to bad hires, which end up costing employers more in the long run.
To help avoid desperate hiring situations, managers should keep a list of potential hires on file, utilize networking, and take their time. Luckily, more employers are starting to become savvy to the costs of a bad hire and have slowed the hiring process. In fact, the Dice-DFH Vacancy Duration Measure found that employers are taking longer than ever—from 25 to 58 working days—to fill positions. Keep in mind that too slow of an approach is not necessarily the best either. If you wait too long to make an offer to a highly qualified candidate who would be a good cultural fit, chances are you’ll lose them to another company that’s already given them an offer. Allow time to thoroughly interview and vet a candidate. Then, once you find your top pick, move in quickly to make an offer.
Rethink the Interview Process
Today’s candidates are better prepared for interviews than ever before. With tons of interview tips and resources available online, most potential hires are prepared to answer basic interview questions, know the ins-and-outs of interview etiquette, and are well rehearsed to impress. With this level of preparedness and showmanship, it can be hard to determine if a candidate would be a good fit for your company.
More often than not, hiring managers rely on tried-and-true interview questions. “What do you consider your biggest strength/weakness?” is one popular example. These kinds of questions, while standard in interviews, are ambiguous and don’t paint a clear picture of candidates or their abilities. Instead, hiring managers should ask behavioral questions that tackle aspects of the job they’re hiring for. For example, if a job requires a lot of customer interaction, you can ask the candidate to recount a specific customer service experience: “Tell me about a time you were faced with an unhappy customer. What actions did you take?” Answers to questions that probe a candidate’s past behavior are great indicators of his or her ability and personality. They also give the hiring manager a better idea of whether or not the candidate would be a good fit within the company.
These interviews should be structured; research has shown that unstructured interviews, in which interviewers are allowed to ask whatever kind of questions they want, are not a good way to learn if someone will be a good hire or not. Furthermore, multiple people from the company should interview a candidate. Having a wide selection of interviewers, including those who would work closely with the candidate or who have performed the job before, will ensure a more thorough interview. It’s also important to leave time for the candidate to ask questions. A potential hire’s questions can be just as telling as their answers, revealing if they would be a good fit or not.
The Importance of Company Culture
Problems arise when employers hire based on skillset alone. Although it may seem counterintuitive, hiring managers need to look beyond an applicant’s abilities and assess whether they would be a good cultural fit within the company. Job skills can be taught, but you can’t change a person’s core personality. Instead of focusing on checking off boxes, hiring managers should keep in mind the company’s beliefs and principles when reviewing candidates’ qualities.
If it’s undefined, take time to nail down the company’s culture. Standards will help guide the hiring process. Does your company value innovation and creativity? Is the environment more data driven than intuition driven? Is it important to the company that employees are self-starters, or that they focus on self-improvement? These types of questions can help define the company’s traits and values, which will ultimately help in hiring decisions.
It is important to note that searching for someone who fits into your company’s culture does not mean looking for a clone of your current employees. Branch out from the person that “seemed nice” in an interview, or the candidate who’s like everyone else on the team. Studies have shown that a diverse group of people working together creates smarter and more innovative teams. Core beliefs should be used as indicators of cultural fit.
Tying it All Together
The costs of a bad hire can be devastating to an employer. Not only is the replacement cost high, but a bad hire can also have a negative effect on the rest of the employees, the work culture, and customer experience. To lower the chances of costly turnovers, hiring managers need to be diligent in finding the right candidate to fill a position. By investing time in properly formatting the job posting, the interview process, and the hiring procedures, money and time can be saved in the future, resulting in a better return of investment for each new hire.
of turnover in field sales, it is easy to get bogged down by constantly finding new hires, but don’t start throwing people onto the team. Today it will save you 5 minutes, but tomorrow it will cost you much
It caught my attention when you said that 80% of employee turnover is caused by hiring the wrong person. The company I work for needs to hire a manager for one of our internal teams before next quarter. Maybe we’ll look into working with a leadership assessment service to make sure we pick the right candidate for the position!