Zappos CEO, Tony Hsieh, estimates that poor hiring decisions cost his company more than $100,000,000 over 11 years.
The true cost of a bad hire? Expensive!
Gallup research shows that only 10 percent of people have “natural” management talent. It claims organizations fail to choose the right talent for a manager position a staggering 82 percent of the time. Data from the Department of Labor suggests that the cost of a single poor hire is at least 30 percent of the employee’s first-year earnings. At the senior level, those costs increase exponentially. And when someone is a poor fit and is responsible for managing others or hiring, culture is compromised. Put aside the actual cost of hiring someone who is a poor fit and take into consideration the toll a bad hire takes on a manager’s patience and on the morale of fellow colleagues, not to mention other additional costs if that person must be replaced.
Bottom line: the cost of a bad hire is expensive. It adds up to wasted time, resources, and dollars spent on hiring, onboarding, and managing a poor fit for your organization. Not to mention the costs of finding a suitable replacement.
Hiring is an Art
The act of hiring requires the right skills. Asking someone without the right HR and hiring skills to handle hiring is the first problem. Another issue for many companies is time, or a lack thereof. Many organizations need to fill a role – especially at the executive level – in a hurry. If a key employee departs unexpectedly, it can throw a major wrench in overall productivity for the company. Too often, hiring managers put urgency before finding the right fit. Candidates that have the technical expertise must also require the right management style and fit in with the overall culture of your organization to truly thrive.
Timing aside, many managers simply do not possess the right hiring skills. Research plays a significant role in identifying candidates – many of whom aren’t actively looking for a job. Internal hiring managers may not have the time or resources to devote to properly researching passive candidates. Behavioral interviewing is also an art and one that hones in on identifying skills and attributes that match qualified candidates to the right organizations.
What if There was a Guarantee?
A repeatable process is also key to hiring success. Organizations that lack a standardized interviewing process are five times more likely to make a bad hire than those that do have such a process, according to a 2015 talent acquisition study from Brandon Hall Group and Mill Valley, Calif.-based Glassdoor, an online provider of company ratings and salaries.
Executive search firms that have a history of hiring success often follow a repeatable search process. The most successful firms include the right kind of passive candidate research and competency-based behavioral interviewing that are vital to finding the perfect fit. The cost to outsource the recruiting process is minimal in comparison to those incurred when a bad hire is made.
Like what you see here? Visit Torch Group’s blog Pass the Torch for more executive hiring tips.