According to Dice.com: (The Cost of Bad Hiring Decisions Runs High)
- Harvard Business Review asserts that as much as 80% of employee turnover is due to bad hiring decisions.
- The Society for Human Resources Management (SHRM) claims that a bad hire can cost a company FIVE TIMES the person’s annual salary, though the cost exponentially skyrockets the higher the person’s position plus the longer he/she remains in that position.
- “There are also hard to quantify costs that could be lethal to your business such as low employee morale, customer dissatisfaction, lost customers, lost sales, reduced quality of products and low production.”
Additionally, as Entrepreneur.com perceptively states…in today’s transparent world, your bad hiring decisions lead to employee morale problems which impact your company’s online reputation. Rack up too many reputation hits and then see how difficult it becomes to attract the best and the brightest to your organization. (What Really Happens When You Hire the Wrong Candidate, 2015)
So why are hiring catastrophes occurring? Because we keep repeating bad hiring practices. Quite simply if we STOP our bad hiring habits, we’ll STOP the catastrophes!
Here are just a few of the more common bad practice patterns that I’ve observed over the years. Each pattern in and of itself could be represented by multiple variations. I chose one real-life scenario per pattern, names changed of course, to illustrate how we’re shooting ourselves in the foot and paying the price.
STOP! Emotional Hiring
Also referred to as the “don’t confuse me with the facts” flub, the leader loses objectivity during the hiring process. Such was the case with Jack and John.
Jack, an up-and-coming C-Level, knew with 100% certainty the exact knowledge, experiences, capabilities and accomplishments needed for the highly visible, over-the-top demanding, strategically crucial Operations Director role. In fact he had excitedly invested countless hours into crafting a well-researched and thoughtfully constructed interviewing guide and scoring sheet to properly vet the candidates. Blowing this hire would certainly tarnish Jack’s freshly minted reputation. Too many people across the organization were hedging their bets on a new Director with operational turnaround mastery. They were counting on Jack to make the right choice!
But what happened instead? Jack fell for an illusion, unsubstantiated promises and the appeal of a quick decision as Jack and candidate John energetically painted a vivid picture as to how John would elevate Jack to even greater heights. Honorably-intentioned, John with his raw enthusiasm, go get ’em attitude and esprit de corps demeanor, swiftly reeled Jack in. What the two had failed to recognize during their euphoria-infused state is that: 1) Jack’s unique, rigorous and unbending strategic expectations of the Operations Director role didn’t closely align with John’s experiences or know-how; and 2) they both wanted to play in the same “let’s invent new” sandbox even though Jack really needed a full-on operational turnaround expert to fix a fundamentally broken though highly relied upon functional area. Despite the contradictory interviewing and scoring data that clearly depicted John’s ill fit, Jack was emotionally sold on John as his candidate of choice and went to great lengths to rationalize his impulsive decision with himself and others.
The outcome…Jack hired John. Within 1 1/2 years, John was terminated because he wasn’t transforming operations at the pace nor degree required.
STOP! Pedigree Hiring
Also referred to as the “bright shiny penny” syndrome, the leader is so enamored with the candidates’ higher education institutions, degrees, certifications, licenses, armed forces background and/or family lineage, that the interviewing process becomes severely compromised. “You must be great because you graduated from <institution>, you’re a former <military branch>, you’re certified in <certifications>, you’re licensed in <licenses>, or you’re related to <lineage>!” You’re hired!
Enter Ken. With his Ivy League M.B.A. in tow, Ken was touted as the new golden child of a multinational private equity, alternative asset management and financial services corporation. Riding on a high wave of pedigree school acclaim even though he had chalked up only one acquisition success, Ken abruptly met his Waterloo. He had convinced his blindly-trusting firm to add Company XYZ to their diversified portfolio, citing exceptional market position, brand loyalty, growth consistency and strong cash flow as the predominant forces behind his decision.
From the get-go, Company XYZ employees who were closest to the action knew, with 100% certainty, that Ken and his team had failed to perform beyond a superficial level of due diligence. If the acquiring team had merely spoken with those below Company XYZ’s Board and C-levels, Ken would have deftly discovered the voluminous leadership and operational albatrosses lurking in the shadows. Instead, overly confident Ken and his golden child reputation proceeded with the ill-fated acquisition.
The outcome…Company XYZ filed for Chapter 11 within a short 4 years post acquisition. The bankruptcy protection filing was characterized as a rare setback and failure for the acquiring firm and Ken in particular.
STOP! Group Think Hiring
Also referred to as the “we need someone exactly like us” blunder, the leader creates an inbred organization or team that takes on an almost The Stepford Wives movie creepiness with frighteningly submissive employees. While there are many real-life examples to choose from, Christine’s is one of the most disturbing.
Vice President Christine was the poster child for ruling with an iron fist and hiring like-minded directors and project managers who would squash employees like bugs if they didn’t fit into Christine’s “we’ll tell you what to think and do and when to think and do it” box.
Christine was expert at surrounding herself with “yes” people. It was abundantly clear that Christine didn’t want to hear your ideas, perspective and recommendations. You could see the blatant fury in her eyes and feel the overwhelming dread blanket the room when someone dared to respectfully challenge a Christine-ism. Her underlings propagated the same and, of course, were undyingly supported by Christine. And the irony — while Christine touted herself as a strategist, at best she was tactically analytic, though her bullying behavior far overshadowed her strengths, whatever they may have been.
So Christine and her band of like-minded oppressors led a critical arm of the company that drove customer contracts, plowing through anyone and everyone that got in their way. Making matters exponentially worse, Christine and her team were capability ineffective. The customer base which they were accountable for kept shrinking year over year. And the rest of the Executive Team stood idly by, watching the impending and predictable disaster unfold.
The outcome…Christine, the self-proclaimed strategist, and her minions led the company down a path that resulted in financial disaster. The customers eventually bolted, the employees were displaced and the organization’s doors and windows were ultimately shuttered.
STOP! “I’m Just Taking Up Space” Hiring
Also referred to as the “who cares if you aren’t purpose-driven and accomplished — let’s just check off the box” bungle, the leader just goes through the hiring motions to fill an open slot before both the position and budget evaporate. As the countdown clock annoyingly ticks away, isn’t it better to hire a warm body than no body? We can always get rid of the person if they don’t work out, right?
Quick! We need a Project Manager! If they can spell P.R.O.J.E.C.T. — hire them! And in walked PMP-certified Tony. As time marched on and as Tony’s name was bantered about, the eye-rolling reaction from most said it all. Tony…nice guy but…can’t execute, no initiative, no sense of urgency, no substance, no results. Tony was a theory guy — not a get-it-done guy. As far as Tony’s motivation, he just showed up to collect a paycheck. No glimmer of a higher purpose, personal passion or inner drive. Tony, where is your project plan? Crickets. Tony, where’s your status report? Crickets. Tony, what’s your target date? Crickets. Tony, what have you accomplished? Crickets. Tony, where were you yesterday? Crickets.
The outcome…Tony was terminated three years ago after lackluster performance. Since termination, Tony has held three more Project Manager roles in three separate companies. He is no longer with the last of the three companies. Sadly, I bet I know why.
Estimating Tony’s salary to be somewhere in the $100K range, just imagine what Tony has cost those four companies in hiring, on-boarding, training, salary, benefits, employee morale, customer dissatisfaction, lost sales, low production and lack of results. If we believe SHRM’s numbers, Tony has cost the four companies a whopping $2 million in bad hiring decisions ($100K annual salary x 4 companies x 5 times annual salary covering total employer investment).
STOP! “I Never Properly Managed Your Expectations” Hiring
Also referred to as the “so I misrepresented the company, your role, your benefits package, your success criteria — what’s the big deal?” screw up, the leader typically acts irresponsibly because he/she: 1) isn’t paying close attention for whatever reason; 2) doesn’t know how to effectively interview candidates including giving them the information they need to make an informed decision; 3) is disengaged (mentally “checked out”) and therefore doesn’t really care about painting the full picture to the candidate; 4) is purposefully withholding or misrepresenting information in an attempt to manipulate the candidate into accepting the position in order to advance the leader’s personal agenda; 5) doesn’t really know what’s needed or involved in the role, therefore doesn’t establish accurate expectations; and/or 6) was promoted into a leadership role for which he/she is not qualified.
In walked gung-ho Bernard, chomping at the bit and ready to dig in. His role was business developer. Bernard’s first assignment was to co-create a prioritized business development plan with the CEO, Bernard’s new boss. And they were off to the races! But before too long the CEO took a sharp left turn, heading into an entirely different direction with a whole new set of business development priorities. Bernard gingerly reined in the CEO so they were once again singing from the same song sheet. Perfect! A mere two weeks later the CEO once again jumped off script. “What’s up with that?” Bernard wondered. Bernard engaged in yet another heart-to-heart with the CEO. All was rectified until the cycle continued to repeat itself yet again and again. Clearly the CEO was pursuing his own unspoken agenda and, as a result, Bernard had finally reached his breaking point. What had Bernard learned along his unfortunate journey?
From the very start the CEO had misrepresented:
- Himself and his shortcomings
- His eerily similar inability to effectively collaborate with those who preceded Bernard
- His manic work style
- His self-selected short term memory
…plus a host of other divisive habits, traits and behaviors that conveniently were never shared with unsuspecting Bernard during the hiring discussions that had a direct bearing on Bernard’s ability to achieve results.
The outcome…Bernard tired of the CEO and his abhorrent, self-indulging and self-sabotaging ways and resigned. The CEO…well…he’s still floundering.
STOP! Round Peg/Square Hole Cultural Fit Hiring
Also referred to as the “be careful what you wish for” or “what were you thinking?” miscalculation, the leader is bent on initiating a dramatic cultural shift of some sort, so he/she hires a highly capable cultural change agent. I’ve seen this typically play out as organizations drive toward:
- Crisper executable strategies
- Inspiring leadership
- Enhanced performance and speed to market
- Higher quality
- Increased products and services relevancy
- Optimized resources and processes
- Elevated employee engagement
- Heightened internal and external customer experiences
- Exponential results
Craig’s company, a dyed-in-the-wool, caught-in-a-time-warp health insurance organization, was languishing from old style thinking, behaviors and methods plus lackluster results. Craig believed that injecting new, energetic and diverse blood into the tired and stuck-in-their-ways leadership regime, would be just what the doctor ordered. Vice President Craig was ecstatic when he hired his new director Karen, an accomplished change agent with a litany of professional successes under her belt. Welcome aboard, Karen!
So Karen was doing exactly what Karen should have been doing and what Craig had expected her to do — respectfully challenge the status quo as she introduced thought leadership, best practices and innovative solutions, all with an eye on raising the performance bar and delivering exceptional results. But much to Karen’s chagrin, at ever imaginable twist and turn in the road, her ideas were being unceremoniously dismissed. Worse yet — Karen who had invested years into refining her capabilities so as to become an inspiring leader of people and teams, had become a whack-a-mole target as the company’s leadership continuously attempted to shove Karen down into the tactical task weeds.
And where was Craig during in all of this? Instead of partnering with and advocating for Karen, after all he did hire her to socialize and advance cultural change, he had publicly distanced himself from Karen because he didn’t want “the old guard” to know that he was behind Karen’s altruistic mission. But eventually, despite Karen’s honorable agenda, hard work and long hours, Craig confidentially told her that he was willing to pay Karen a hefty severance package just to make her quietly go away. The company wasn’t ready for change.
The outcome…Karen bided her time until the right opportunity knocked at her door. She collected a sizable financial “parting gift”, compliments of Craig, then swiftly took the reins of an executive position within a global company where her change agent talents were effectively leveraged plus appreciated.
Thought Provokers: The stats are in! 80% of employee turnover is due to bad hiring decisions. Each bad hiring decision costs companies up to 5 times the person’s annual salary. Bad hiring decisions result in a host of other costly plus disruptive issues including lower employee morale, customer dissatisfaction, lost customers, lost sales, reduced product quality, lower production and damaged company reputations.
What are you doing as a leader to increase your hiring effectiveness? What is your organization doing to increase its hiring effectiveness?