StartUp Advice: the real cost of hiring the wrong people

What is the real cost of hiring the wrong employee? Eye-watering, according Tanvir Haque, Founder of Freshstone Consulting.
By Tanvir Haque
Fri 08 Dec 2017 05:33 PM

Last year online job board Career Builder interviewed over 2,300 US hiring managers and HR professionals and found that three-quarters of them admitted having hired the wrong person for a position, at a cost of up to $24,000 each for larger firms.

It is a similar story in the UK, where replacing an employee costs more than £30,000 - or £4 billion a year - aside from it taking an average of eight months to bring a replacement up to speed.

Employers have every opportunity to assess the person sitting at the other side of the desk. While candidates may then disappoint with their attitude, integration or aptitude, the responsibility and consequences for this still lie with the hirer. So what could employers be missing? Shifting the focus of recruitment might help to answer this and reap long-term dividends.

Breaking down costs
Before looking at the right way to hire, it helps to understand the implications of ‘hiring the wrong way.’ The monetary cost is obvious and in the UAE, Ministry of Labour legislation requires employers to bear the cost visas and repatriation. If the new hire doesn’t work out, you will also need to pay the visa cancellation fees. In a country where a significant proportion of professionals tend to ‘job-hop,’ these costs can mount.

But there are other, less immediate costs that can chip away at the foundations of your business. CareerBuilder found that of those companies that acknowledged a bad hiring choice, 52% discovered the candidate had a negative attitude, while 51% found their hire didn’t work well with others. Worryingly, 38% found that their clients outright complained about the new hire. Poor productivity is one thing, but a bad attitude can rub off on the rest of your workforce. If they’re also painting a bad public image of your business at the same time, that could have very adverse consequences for your business.

Talent vs skills
Based on research from workable.com, a good ‘interviews per hire’ metric globally is around 13-14, which is the number of conversations, in person or otherwise, conducted with all candidates to fill one position.

Traditionally, employers have recruited on a tried and tested search for skills, competencies and previous work experience. Those seem like worthy criteria, so why, according to UAE recruiters Robert Half, do 77% of UAE hiring managers feel they’ve got it wrong in the past?

Skills, competencies and experience belong on a resume, but a resume and an interview are two different things and should not be confused. There is a growing school of thought that what we should be looking for in candidates has less to do with their ‘skills’ – what they’ve learned in their career to date – and more to do with their ‘talent’ – the qualities they inherently bring to the table.

In terms of searching for talent, you first need to know what you are looking for and what you hope to find. Start by deciding what talents the ideal candidate needs to display, then screen for those exact talents. The key to this is being able to distinguish a talent from a skill – after all, you can teach skills, but you can’t teach talent.

According to Gallup’s Ken Tucker, talent is ‘a naturally recurring pattern of thought, feeling and behaviour that can be productively applied.’ A strength however, is ‘the ability to provide consistent, near-perfect performance in a given activity.’ Keep these definitions in mind when hiring and you will soon get into the habit of differentiating between the two in an interview situation.

‘Ready, fire, aim’
Right words, wrong order. Yet this is the approach of a surprisingly high number of hiring managers - deciding that there is a role to fill, then casting the net for skills and experience, before trying to retro-fit each hire to the needs of the business.

In his book ‘Guts!: Companies that Blow the Doors off Business-as-usual,’ Kevin Freiberg defines the correct strategy of ‘aiming before you fire’ as the scenario when you “conduct a thorough analysis of the requisite skills, and equally important, consider the attitudes most compatible with the culture, team, community and position.” Only then should your finger be on the trigger to hire, with a rigorous recruiting process designed to ensure you get the right people.

Talent acquisition experts Gallup have been exploring this approach to hiring and shaping the workforce for years and define talent as ‘recurring patterns of thought, feeling and behaviour that naturally equip them to excel in a role.’ In a recent article, ‘The Rewarding Work of Turning Talents into Strengths,’ they make some thought-provoking points.

First, while candidates traditionally build their resumes around conventional skill sets, it seems they would prefer to be using their talents. Only 20% of workers in a US survey currently feel they are doing so.

Second, talent may need to be shaped, but investing in it is sound, because unlike acquired skills, talent is inherent and permanent in the individual. While acquired skills are useful, according to Gallup, along with regular practice, they are most helpful when they serve as amplifiers for employees’ natural talents.

Third, and perhaps most important for hiring managers, it is good to remember that nobody can be great at everything. In fact, trying to become well rounded can breed mediocrity. Gallup notes that with the best will in the world, an employee working outside their natural area of talent will become average at best in that particular endeavour. In their experience, the leaders who strive to be competent in the most different areas are the least effective leaders overall.

Building a strengths-based organisation
If the above evaluation sounds negative, this is why it is actually the opposite. Companies should not be looking for well-rounded candidates, but instead should be building a well-rounded team. In developing the workforce, employers should strive to fill each position with a talented individual whose abilities can be invested in, shaped and honed to reach their full potential.

Imagine a football team made up of 11 seasoned all-rounders; then compare it to a team of 11 gifted specialists who work well together and complement each others’ skills.

Companies who understand this have placed talent-based recruitment at the heart of their hiring processes. Some recruitment adverts, particularly start-ups and SMEs, are starting to call for the type of ‘colouring outside the lines’ personality that they knew would be a good fit for their company. They think deeply about who their type of employee actually is, then go looking for them.

Some organisations take things a step further and have introduced artificial intelligence into the mix and ask candidates to demonstrate their abilities in neuroscience games before progressing to the next stage.

Robo-advice may be beyond the budget of most firms (and arguably outsources the job of getting to know the candidate) but nonetheless companies should be at least investing time and resources to understand the importance of talent in performance and business success.

Moving away from a traditional hiring process based on skills and experience can be a big step, invoking both resistance to change and a lack of clarity about what ‘talent-based acquisition’ looks like. One option is to engage a specialist recruitment consultant who can help you to identify the key attributes and characteristics that your business needs, rather than dredging for generic skills and experience, then finding a way to accommodate them.

The next step – managing that talent
There is more than one benefit to avoiding the wrong hire. Not hiring the wrong person is more than a bullet successfully dodged - it is a long-term opportunity acquired. Even if the talent is rough around the edges, you’ve invested in a long-term opportunity to shape and polish their inherent abilities to achieve mutual success.

Beyond the huge dollar value of learning, training and development – and the wasted effort if a candidate turns out to be a bad fit for the company – employers need to consider another serious issue. What if the wrong candidate undergoes learning and training at your expense, then takes the benefits to one of your competitors?

An old business anecdote sees two hiring managers turning this problem over. The first asks, ‘What if we train them and then they just leave?’ The second responds, ‘What if we don’t train them and they stay?’ Both sensible arguments, but the second highlights the importance of talent-based acquisition. Get the hiring right and you can invest in training with confidence.

If skills are the cure, talent is prevention
It is hard to overstate the importance of hiring the right people, but it is also impossible to avoid the numbers. The ‘wrong hire’ scenario gives rise to the negative impacts of wasted time, money and effort. Prevention is better than cure, which is why recruiting with an emphasis on talent represents the prevention.

Hiring based on talent will find you the right people, with the innate qualities that will benefit your organisation in the long run. Talent, unlike skills or experience, cannot be manufactured, but it is both transferable and enduring.

Central to business growth is the importance of focusing on the benefits of hiring intelligently, not just on the woes of getting it wrong. In the end, skills and experience matter, but to hire on these criteria alone is to look backwards. Conversely, sourcing talent looks to the future, with your success as a business directly linked to what your talented employees will go on to achieve.

Tanvir Haque, Freshstone Consulting.

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