Can You Afford Bad Hires?

Between recruitment, visa, downtime, loss of productivity, and the negative impact on the rest of the company, a bad hire can cost a company quite a hefty sum. In fact, the Society for Human Resource Management (SHRM) estimates that a bad hire can cost the company as much as five times his/her annual salary. While this may be true for the most senior positions you hire for, a more accepted range is somewhere between 40 to 200 per cent of the employee’s annual salary.

Assume you make a bad hiring decision. The employee’s monthly salary is Dhs10,000 or Dhs120,000 annually. If you lose that employee after six months either due to termination or resignation, it has cost your company anywhere between Dhs48,000 to Dhs240,000. At a monthly salary of Dhs25,000 your loss can be as much as Dhs600,000 if not more if one takes SHRM’s figures. Even when you don’t lose the employee, a bad hire can cost as much as half his annual salary every year in terms of loss of productivity and negative impact on the workforce.

Can you afford these numbers?

Recruitment in most organisations goes something like this:

The manager asks the Human Resource (HR) department for resumes for a position. The HR department forwards a number of ‘shortlisted’ resumes to the manager who then proceeds to interview these candidates asking questions like “tell me about yourself” and “what are your hobbies” and then picks a candidate. A job offer is made and three months down the line, the manager discovers that despite being an avid basketball player, the candidate is not a team player*.

Here’s how recruitment should happen:

The manager profiles the ideal candidate in terms of years of experience, qualifications, and essential competencies. For example, for an accountant, the manager might decide that (s)he needs someone with four years’ experience and a bachelor’s degree in finance. More importantly, this person needs to be a team player, has good analytical skills, and the ability to work under pressure. The manager submits this profile along with an updated Job Description to the HR department.

The HR department shortlists applicants based on this profile and then conducts preliminary interviews to determine organisational fit. While there are no hard and fast rules, I’ve found that depending on the position, four to 10 initial interviews are sufficient to produce a short-list of at least two strong candidates provided the shortlisting was done according to a good profile and an updated job description.

Organisational fit is perhaps one of the most ignored elements in recruitment despite its importance in determining how a new employee will fare with the company. Organisations have cultures ― certain ways of doing things ― that are unique to them. It is the HR department’s role to determine whether a candidate can work effectively within their company’s culture at the initial stages of the recruitment process. If the candidate is not a good fit, there is no point in wasting the manager’s time with him/her.

The manager interviews for job fit. In other words, can the person successfully complete the job and work with the existing team and the manager? Can the manager ‘manage’ this person effectively? Unfortunately, most managers don’t know how to target their questions and how to use behavioural (or competency-based) interview questions. Behavioural interviewing focuses on demonstrable examples of the behaviours necessary for the job. In the case of the accountant for example, the manager can ask, “give me an example of a time when you needed to work on a project with a team and were able to complete it on time.” Notice the question asks for a specific example and not just “are you a good team player?” or “have you worked in a team?”

In addition to these questions, the manager should also assess whether the applicant is technically capable. This is best accomplished using a test instead of wasting the interview time on these elements. For most junior professional roles (like the accountant), a viable test can be designed that can accurately and objectively determine the candidate’s technical competence. During the interview, focus your questions on clarifying the test results and understanding whether the candidate can work effectively with you and with your team.

Another often neglected area is reference checking. While not always exact, the seasoned HR professional can always gauge whether the previous employers are enthusiastically recommending the candidate or are simply being ‘nice’ by not saying anything negative. For the more senior positions, using a combination of technical and psychometric assessments will also reduce the chances of making recruitment errors since psychometric assessments provide another source of data that can be used in combination with everything else to determine the suitability of the candidate.
While we can’t fully eliminate recruitment errors, we can reduce the costs associated with bad hires significantly if we improve the recruitment process.

Can you afford not to?

* This is a real example that was contributed by a manager during a recruitment interviewing skills training I was facilitating some years back.