3 Terrifying Recruitment Statistics

We believe that selecting the right people for your business is crucial for business success, so here are some scary statistics to make you think on the eve of Halloween. Are you attracting, selecting and hiring excellent people who will thrive in your culture?

1. A mis-hire costs more than 5 times the candidate’s salary.

There are loads of different figures that reports the true cost of recruiting the wrong person in your business — Dr Brad Smart has estimated 5 times the annual salary. According to the Office for National Statistics, the average UK salary is £27,271. So, getting an average job-level hire wrong is going to cost your business in excess of £136,355. Imagine that you are recruiting a FTSE 100 CEO… at an average salary of £4.5M, getting the wrong person is going to cost your business £22.5M+. (Ouch).

These figures do seem fairly dramatic, however hidden costs can easily mount up using a combination of these factors:

• Generally it’s not cheap to hire people, recruitment costs are estimated at around £3000 per hire (if you directly source) at an average salary, and the sky’s the limit for executive placements at typically 25% of their starting salary.
• Bad decisions made by these mis-hires will have a real impact on your business, these mis-hires may then go onto hire their own people, creating more mis-hires and exacerbating the problem throughout the organisation.
• There could be significant reputational damage to the organisation. In our world of ever-increasing transparency, candidates and customers just need to go on sites like Glassdoor or Indeed to find out what it’s like to work in the organisation and Trustpilot to get reviews from customers. If you have a toxic work culture it is going to come out. When people have a positive experience with a company, they may tell a few people, when they have a negative experience, they tell loads!
• Losing customers and resulting sales because of poor client relationships due to a mis-hire can be a significant cost to your business. You need to be able to trust all your employees to do the best by your customers, because without customers you have no business.
• The final significant impact could be the loss of employee morale due to having to deal with, attempt to train or, worse still, be managed by a mis-hire. This loss of morale often leads to decreased productivity and increased turnover of other staff within the department. I’m sure you know people who have left an organisation due to having an absolutely awful boss. A question that I always ask myself, do people leave organisations or do they leave horrible bosses?

Hiring the right people takes some effort to get right, Zappos CEO, Tony Hsieh has told the world that his own bad hires have cost his company well over $100 million, there are certainly lessons to be learnt there. Zappos ensure they are hiring people for long-term culture-fit (which is great, as long as you have properly defined that culture) and pass on candidates that are highly qualified, but who are not a fit to the culture.

Organisations are not routinely measuring quality of hire and measuring its impact on their business. This is a crucial measure of your recruiting success that you need to focus on to ensure you are hiring people that are right for you.

2. According to Gartner, 20% of all hires are “bad hires” or “regretted decisions”

Organisations regret 1 in 5 hires. Seems like good odds, most hiring managers in SMEs don’t hire that many people. However. If we were to say 20 in 100 hires or 200 in 1000 hires, you’ve got a big HR problem on your hands. Poor hiring decisions can cost your business.

What could be the reasons for these poor decisions?

• A lack of understanding about the fundamentals of what the new hire should be able to do or achieve. This happens when someone resigns and the hiring manager just dusts off the old job descriptions and asks HR to find them a new employee. Jobs are rarely static, it’s unlikely that an old job description can be recycled. Effort needs to be put in to ensure that you know what the new employee is expected to accomplish in order to succeed in the role. A good starting point would be to ask the departing employee to see what they do and what could be done to make the role better.
• The quick being the enemy of the good. Why is time to hire even a recruitment metric? We need them yesterday, get them in quick. Speed does not equal quality! I keep going on about this, but quality of hire should be the key recruitment metric. It is easy to be reactive and whilst a job is unfilled, it either doesn’t get done, which has an impact on the company, or someone within the company has to pick up the slack.
• There are a worrying amount of untrained or poorly trained interviewers. The ability to recruit people is a skill, people need to learn it. Not everyone can do it. It is perhaps not great in organisations who promote people to their first managerial role, yet somehow forget to train these new managers. New managers don’t just wake up one day and magically know how to manage people and hiring the right people should be part of this training also. Not everyone likes to conduct interviews; is seen by some as a bit of a chore, so chose people who have an interest and aptitude for it and focus your training efforts on them.
• Despite the reams of information available on how to conduct interviews, interview decision making is generally poor. I have seen decisions that are made within minutes of the interview with little or no interview scoring/comparison. Decisions are often emotional ones, not logical rational ones. You need the best person for the role, this is not the nicest/most fun/most likely to go for a pint. It’s an organisation, the successful person needs to be able to perform in their role. Remember candidates are on their best behaviour during the hiring process and if you have a candidate who can befriend everyone they meet and have the ‘gift of the gab’, they might be able to slip through the cracks. Make sure you score all candidates against predetermined criteria, sleep on the decision twice and then get the panel back together to discuss candidates in a logic, rational and objective manner.
• Probably the most sad reason for a mis-hire is due to the new hire not being able to perform due to a lack of onboarding, expectations and goals have not been set and they don’t even know they are not performing. This situation, coupled with poor performance management practices, where managers are reluctant to have ‘difficult conversations’ and offer no continuous feedback or expectation setting can leave employees and organisations in a worse position. These 1 in 5 regretted hires then end up being allowed to languish miserably in your organisation, becoming more and more detached and disengaged, do them, the team and your organisation a favour — manage them!

3. CIPD has reported that 75% of UK HR Professionals have experienced recruitment difficulties.

The unemployment rate is falling and it’s seemingly becoming increasingly difficult to fill positions, particularly in organisations who operate within STEM industries. The shortage of talent or ‘war for talent’ in certain industries is getting worse. Organisations are competing for a finite resource and this is leading to companies being forced to out-pay their competitors or literally do without.

Organisations who find themselves in this predicament need to act differently to attract, select and hire the right talent for their business. It is astounding the number of companies who always want to get the most experienced and qualified candidates into roles and there is no thought given to growing your own! One of my favourite sayings can be used here, “if you always do what you always did, you’ll always get what you always got”!

It is time to think creatively. We feel that there is a massive over reliance of the CV-based approach to hiring based on purely experience and qualifications. Your organisation could be potentially missing out on some excellent candidates. Do something to break this cycle! Throw out the reliance of CVs and test a candidate’s ability to think, problem-solve, innovate and learn!

We strongly believe that if someone has the right attitude, values and beliefs that match your organisational culture, you can train them to do anything. Of course, there are some obvious exceptions to this rule — Doctors, Pilots, Lawyers, Psychologists etc who legally need the qualifications to practice, but should still be selected based on their attitudes, values and beliefs.

This article was originally posted on www.mp-squared.com

MP Squared is a business founded by an Organisational Psychologist and Recruitment Director. We show businesses scientific and reliable methods of selecting employees which predict performance and achieve business excellence. We believe that aligning culture and values and being able to define excellence in employees is key to retaining talent and achieving excellence by increasing performance.