BY MICHAEL F. BROOM, Ph.D., Organization Development Psychologist
The success or failure of an organization is determined by the people who make up the teams of followers who do the work of the organization. Hiring well, therefore, is one of the most critical responsibilities of a leader. Hiring well has powerful benefits. Likewise, hiring poorly is incredibly costly.
What are the costs of not hiring well?
Not hiring well leads to turnover, which is extremely costly in terms of both direct and indirect ways that significantly impact an organization. Some of these costs include:
- Monetary costs: The direct financial costs associated with a bad hire can be staggering. These include the costs of recruiting, onboarding, training, salary, and, in the event of termination, severance pay. According to a study by the U.S. Department of Labor, the cost of a bad hire can equal 30% of the employee’s first-year earnings.
- Productivity loss: Subpar performance is the primary reason leaders judge a hire a failure. This productivity loss affects the productivity of other employees and the entire organization.
- Employee morale and engagement: A bad hire can significantly impact team dynamics and morale. A poor hire can cause more work for other employees, create tension and conflicts.
- Leader productivity: A bad hire takes up time fruitlessly helping them succeed, then more time documenting their poor performance. You need the latter to avoid legal issues if you fire the person. Your time would be better spent with your good hires.
- Cost of replacement: Replacing a poor hire is costly, but still less than the cost of holding on to them. Replacement costs include the time and resources spent on advertising the position, screening, and interviewing candidates, and training the new hire.
- Opportunity costs: Finally, it’s important to consider the opportunity cost of a bad hire. Every day that a poor performer occupies a role, it’s a missed opportunity for a better performer to be in that position contributing more effectively to the organization’s goals.
The extent of these costs highlights the importance of hiring well. An important, but not an easy task.
How leaders can hire well
Given the critical importance of hiring well, leaders can improve their hiring processes in the following ways.
- Define the job clearly: The most important task is defining the job thoroughly. Laying out the roles and responsibilities are typically. Be sure to define the standards of performance potential hires must meet. Go beyond technical skills and describe the people and team skills needed.
- Interview well: Focus on job-relevant criteria and use a standard the evaluation process. Test for technical and people skills experientially. Assessment center techniques are very effective. Be honest about the challenges of the job and the organization. New employees who discover significant challenges they were not told about during the interview become quickly disillusioned and discouraged.
- Involve the team: The people who will work directly with the new hire often have a good sense of the skills, experience, and personality traits that would complement the team. Involving them in the hiring process can increase the chances of a good fit. It also contributes to the prospective employee being fully informed about what they are getting into.
- Look for potential, not just experience: The ability to learn quickly with an open mind is often as important as experience. The capacity to grow and succeed in different roles is important. Look for individuals who want to grow, are curious, are adaptable, and have a passion for learning.
- Check references diligently: Reference checks can provide valuable insights into a candidate’s past performance and working style. Ask open-ended questions about both technical and team issues. Push for detailed responses while listening for red flags.
Hiring has to do with humans judging humans, and errors are inevitable. Identify and correct such errors, sooner rather than later. Beware of hanging on to poor performers, hoping for improvement that never comes. Doing so simply doubles the damage.
A caveat: if you choose to hire cheaply and train, be sure to hire for the ability to learn quickly and structure your work processes to allow for the time development takes. This takes considerable planning if productivity is to be maintained. Reward those who develop successfully with competitive pay. Otherwise, you are simply training good people for your competition.
Hiring is one of the most impactful decisions a leader makes. While the process may be complex and time-consuming, the benefits of hiring well and avoiding the pitfalls of poor hires are well worth the effort.
Michael F. Broom, Ph.D. is the founder and CEO of the Center for Human Systems. He is an organization development psychologist with over 45 years of experience. The national Organization Development Network honored him with their Lifetime Achievement Award!
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Check him out on his website at www.CHumanS.com. Or email him at michael@chumans.com.
