The Cost Of A Bad Hiring Decision

September 17, 2013 in

In the course of running my own businesses for more than two decades, I’ve done my fair share of hiring. And I can tell you with absolute certainty that one of the most costly, time-consuming blunders a business can make is picking the wrong person for the job.

How costly? The U.S. Department of Labor currently estimates that the average cost of a bad hiring decision can equal 30% of the individual’s first-year potential earnings. That means a single bad hire with an annual income of $50,000 can equal a potential $15,000 loss for the employer.

bad_hiringThis loss is compounded by the impact of a bad hire on productivity and team morale. One subpar employee can throw an entire department into disarray. Team members end up investing their own time into training someone who has no future with the company.

Tony Hsieh, CEO of Zappos, feels my pain. Heonce estimated that his own bad hires have cost the company well over $100 million. (That’s part of the reason he now offers new hires a $2000 bonus to quit after their first week on the job.)

I don’t give my new employees thousands of dollars to leave (yet!), but here are a few techniques I’ve used in my hiring process that I’ve found to be effective in preventing hiring mishaps:

1. Over-prepare: A job candidate isn’t the only one who should cram before the interview.

When you’re hiring employees for specific, technical roles, it can be hard to prepare the right interview questions. I always find it useful to first find an expert in the candidate’s specific field and get some advice on the best questions to ask. This is worth the extra effort, even if it means consulting someone outside your company.

So if you’re hiring for an IT role, find and talk to an IT person about what makes a good team member. Then, add three specific IT-related questions to your interview. Don’t be afraid to loop back with your expert advisor to get his feedback on the responses.

2. The secretary test: Great collaborators don’t pull rank.

Recently, we had various people applying for a high-level sales role, and time and time again the candidates would bulldoze over my executive assistant. I checked in with her and was surprised to find out that many people who had been personable and courteous to me were downright rude to her.

The ability to work well with others is a skill that benefits any workplace. An obvious way to gauge this is to contact the candidate’s references. But, why not take it a step further and dig into a candidate’s social media profiles? Savvy HR departments are already looking through candidates’ Facebook and LinkedIn profiles. I recommend going as far as checking a candidate’s Twitter feed to gain insight.

A few years ago a promising candidate for a job at our company tweeted this from his personal Twitter account: “going to a phone interview with @hootsuite and I am drunk after a few hours in the ‪ #congress2012‬ beer tent.” We found it and needless to say, he was not hired.

3. The curveball: Hide an unexpected question in the fine print.

Over the years, I’ve found that effective employees are those who take the time to read the fine print. So one thing I’ve done in the past is to throw a small, unconventional request into a job application. This can be something as innocuous as, “Please list three websites you visit often.” Candidates who overlook this question or don’t provide a full answer aren’t worth interviewing.

Why? People tend to be the most alert and thoughtful during this initial stage of the job application process. If they can’t pay attention to details here, how will they perform once they’re hired?

When it comes to hiring, I think Steve Jobs once said it best (as he often did): “I noticed that the dynamic range between what an average person could accomplish and what the best person could accomplish was 50 or 100 to 1. Given that, you’re well advised to go after the cream of the cream. …A small team of A+ players can run circles around a giant team of B and C players.”

How do you find your “cream of the cream”? What are your unique or tried-and-tested hiring strategies?

This post was originally published by HootSuite CEO Ryan Holmes on the LinkedIn Influencer blog.

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