How to Avoid Making Costly Bad Hires

Place less emphasis on experience, standardize interview processes, and if you do make a bad hire, undo it pronto.
Brian Weed and AvenicaAugust 22, 2018
How to Avoid Making Costly Bad Hires

The fact that a bad hire is a costly mistake isn’t news. It’s a well-known truth that hiring mistakes reverberate across the organization.

Unfortunately, in the current full-employment U.S. economy, where there’s stiff competition for top candidates, many companies struggle to find talent and are more likely to make mistakes.

For those who need a refresher course, why are bad hires so costly? First, there are bottom-line costs like the employee’s compensation. There’s the lost investment in recruiting and training. And, in some cases, there’s severance.

But bad hires also cause significant disruption and damage to morale, reduce employee productivity, and create even more HR headaches in the process.

Diminished customer satisfaction, work quality, and business reputation can also end up costing the company more money over the long term than the immediate costs of replacing a bad hire.

One source calculates that when all such factors are totaled up, mistakenly hiring a manager with a $68,000 annual salary can cost more than 10 times that amount if the person is terminated within 2.5 years of hiring.

Effective hiring managers understand that having the best available pool of applicants for every open position is essential for finding the right hire. They employ solid recruiting processes and consistently optimize/re-optimize those processes to ensure the talent pipeline remains full.

So, what can companies do in a “seller’s” market? It all starts with smart recruitment. Here are some tips for employers looking to stay competitive while recruiting in a hot job market.

Recruit for Skill, Not Experience

While some positions may require certain technical skills or certifications, employers can improve résumé flow and connect with higher-quality candidates by thinking more expansively about hiring.

Transferable skills like leadership, communication, resilience, and problem-solving are often far better predictors for future success than work experience. Recruit for competency, rather than pedigree or even degree.

Also, rethink the way technologies like applicant tracking systems are used. They can give preference and higher visibility to certain candidates with ultra-specific skill and experience requirements.

Finally, consider training and onboarding as part of the recruitment process. Train the right candidate rather than hire the wrong-but-experienced candidate. Or partner with a third-party provider or intermediary that provides the training, like some staffing companies are beginning to do.

Standardize the Interview Process

 According to Brandon Hall, 69% of companies identify their interview process as the most important factor in quality of hire. Companies that lack a standard process are five times more likely to make a bad hire than firms with a standard process.

Clarify what should be covered at each stage of the process: screening interviews, first interviews, second interviews, peer interviews, and final interviews. Providing interviewers with a checklist of questions helps improve consistency and outcomes. Unless you’re asking candidates the same questions, how can you properly compare them?

Cut Bait on Bad Hires

When mistakes begin to surface, find another position in the organization that is a better fit for the individual, or cut ties altogether.

Whatever the solution, act fast. It’s human nature to delay, defer, and rationalize second chances. Identify hiring mistakes and correct them before they begin to negatively impact the entire organization.

Importantly, don’t punish good employees for bad hires. It’s often your top performers who end up overworked and burned out from picking up the bad hire’s slack, contributing to unwanted turnover. 

Marshal Resources and Get Help

Prioritize recruitment efforts. From employer branding to developing an effective interview process to crafting the right onboarding, a lot goes into recruiting.

But it’s worth the effort. Your company’s performance is directly correlated to the talent and productivity of your employees, as well as your company culture and morale.

Last Word

The current hiring climate is extremely challenging for all industries and companies. But with a little guidance, support and foresight, employers can reduce the risk of bad hires.

Investing in and committing to recruitment best practices will reduce the risk and cost of bad hires and pay dividends for years to come. After all, as Ross Perot once said, “Leaders don’t flock; you have to find them one at a time.”

Brian Weed is CEO of Avenica, a national career matchmaking firm specializing in placing recent college graduates into entry-level, career-track positions.

Photo: ThinkStock