Hiring woes: the costs of bad hires and how to avoid them
Companies suck at hiring. As many as 95% of companies admit to a bad hire each year, according to a report by Glassdoor and Brandon hall Group. Why? They compromise.
The #1 reason companies make bad hires is they compromise, they settle, they don’t hire the best person for the job. Compromise has its place in business, but it has no role in the acquisition of talent. — Mike Myatt, chairman of N2Growth
They compromise because each hire isn’t critical, businesses underestimate a bad hire’s effect and costs.
Bad hires can cost you over $100 million
When companies total the costs for a bad hire they only consider direct costs: the price of a flight and hotel, relocation fees, training, severance. Two-thirds of businesses estimate the cost of a bad hire as approximately $50,000 or less, according to a study by CareerBuilder. This is looking at the costs through a pinhole.
The biggest costs are indirect: lost productivity and low morale. More than 270 CFOs were asked in a survey by Robert Half, “Which one of the following, in your opinion, is the single greatest impact of a bad hiring decision?”
- Lower Staff Morale: 41%
- Lost Productivity: 34%
- Monetary Cost: 19%
- Other/Don’t Know: 6%
Greg Scileppi, president of staffing at Robert Half, explains why:
A bad hiring decision can often cause a negative ripple effect through the organization. Hiring a bad fit or someone who lacks the skills needed to perform well has the potential to leave good employees with the burden of damage control, whether it be extra work or redoing work that wasn’t completed correctly the first time. The added pressure on top performers could put employers at risk of losing them, too.
At a startup I worked at, one bad hire wiped out the core engineering team that’d built the company to a 300+ million-dollar valuation. The guy was an ass nobody wanted to be around and did the kind of shoddy work that’s easier to delete and redo than to fix. One half of the team left because they were sick of the prick (I was in this group). The other half left because hiring this guy was the last straw in losing faith that management knew what they were doing. And then when management hired replacements, it wasn’t long before they quit too.
Viewing the problem from the top, considering the ripple effects, Zappos CEO Tony Hsiesh estimates the cost of bad hires for his company is “Well over $100 million.”
Companies suck at hiring, bad hiring is a huge cost, what habits can companies kick to improve?
Knock it off with the head count quota bullshit. “We’re at a headcount of 125, we want to get to 250 in six months, but want to keep the hiring quality high.” In other words, in Canadian hoser vernacular, as one yells before jumping a 30 foot gap with a 30 dollar snowmobile, BUD WE’RE JUST GONNA SEND IT. Unless you’ve sent Obi-Wan out there looking for a Dennis Ritchie clone army, this is a shit hiring guarantee.
Nearly half the time the cause of a bad hire is the need to fill the job quickly, according to a study by CareerBuilder. And a great hiring opportunity is a rare thing, that is, if you wait for them to come by playing the matching game with other companies, matching compensation and benefits. But you don’t have to play that game.
Matching is for losers. Companies complain about how competitive and hard it is to hire exceptional people. But what do they offer that’s exceptional? Market matching compensation, market matching benefits, in other words, the exact same shit every other company offers. So why the fuck would anyone exceptional join your par-for-the-course company? They wouldn’t and they don’t and it’s nobody’s fault but your own.
FYI recruiters whose companies don’t do remote: Every email you send goes straight in my trash.
DO NOT COMPROMISE. Use the HELL YEAH or no test. Ask yourself how you feel about the person, and how you feel about them being a part of your team, and follow Derek Sivers’ advice:
No “yes.” Either “HELL YEAH!” or “no.”
If you’re not saying “HELL YEAH!” about something, say “no”.
When deciding whether to do something, if you feel anything less than “Wow! That would be amazing! Absolutely! Hell yeah!” — then say “no.”
Please say hi at @travisjeffery.
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Thanks for reading.