Bad Hires Are 3X More Costly Than You Think
By Dana Borowka, MA
There is an old adage that one bad apple can spoil the whole bunch. A bad hire can be that bad apple for you.
Now contrast that to the famous words of anthropologist Margaret Mead: “Never doubt that a small group of thoughtful, committed, citizens can change the world. Indeed, it is the only thing that ever has.”
This is the power of good hires. Team members working together in thoughtful, committed ways to the company mission, core values and objectives can change your workplace world for the better.
When our team has conversations with C-level executives, better hiring is on their minds. Research backs this up.
“Labor shortages are driving talent retention and recruitment to the top of the CEO agenda in 2022,” concluded The Conference Board in its 2022 “C-Suite Outlook,” it’s 23rd annual survey. The report reflects the views of 1,614 C-suite executives, including 917 CEOs globally.
The Conference Board report details the external stress points business leaders face and the impact of these stressors on growth strategies. It includes views on the benefits and risks of hybrid work models, and the struggles to find and keep good employees.
Finding good employees is noticeably harder these days. Research from Glassdoor says attracting the right job candidates is the most difficult task for 76% of hiring managers. A common woe is that the best hires are snapped up in the first ten days of actively being available on the market. This adds up to a hiring process that lasts 36 days, on average.
True Cost of Bad Hires
Bad hires can cost your company more than you think. CareerBuilder reports that 74% of employers say they have hired the wrong person for the job.
According to the U.S. Department of Labor, the average cost of a bad hire is up to 30% of the employee’s first-year earnings.
When you examine the true costs broken down by hiring, retention, and pay, you might conclude the researchers at the Labor Department might be lowballing the true cost. Our team extrapolates the real cost might equal at least projected first-year earnings and maybe more.
Here’s why: Poor hires can result in lost productivity and expenses in hiring, recruiting, and training replacements. That can quickly add up.
Robert Half International reports in Fortune Insiders that managers assert lost salary isn’t the only money they lose by hiring the wrong person. Managers must also spend 17% of their time monitoring underperforming employees. In a typical workweek, that time suck equates to nearly a full day of wasted time.
A Harvard Business Review column by David K. Williams and Mary Michele Scott noted “that of nearly 2,700 employers surveyed, 41% estimate a single bad hire cost $25,000. A quarter of respondents estimate a bad choice has cost $50,000 or more.”
Not to mention the demoralizing impact on other employees.
” A hire that is going the wrong direction is bad for everybody involved,” writes Williams and Scott. “A dismissal is bad for the morale of the entire team. It’s even worse for the morale and future of the person you fire, who faces one of the most stressful events in human experience.”
Here are just some of the ways your company can suffer: lost productivity, loss of focus, poor execution, training costs, legal fees, damaged employee morale, damaged reputation in the marketplace, and lost manager supervision time.
Research by Gallup estimates that actively disengaged employees in the United States cost businesses anywhere from $450 billion to $550 billion in lost productivity each year.
Plus, the number of bad hires is staggering. Think of how many new hires fail to meet expectations.
“Over 50% of newly hired employees fail to meet expectations,” says recruiting expert Barry Deutsch of Impact Hiring Solutions. “Most hiring managers don’t make a significant change by firing the person, putting a PIP together, or having a deep developmental program to improve performance or behavior. They just accept partially competent people, or take those elements off the plate that the employee can’t do – and the manager does it by allowing the monkey to be transferred onto their back.”
Deutsch says that is the definition of dysfunctional.
How To Avoid Bad Hires
Deutsch, coauthor of the book, You’re Not The Person I Hired, offers several suggestions for avoiding bad hires.
“One of the most powerful interview techniques for measuring success is to probe for the ability to continuously learn and adapt it to their job and expectations,” says Deutsch. “Do you probe for deep and continuous learning from the professionals and managers you’re looking to hire?”
According to Deutsch, the interview, when conducted with focused structured questions that correlate to job expectations, can be a very reliable predictor of future success.
“Unfortunately, most hiring managers don’t define the expectations so the interview questions are in doubt,” adds Deutsch “Secondly, the biggest mistake is that most hiring managers have never been trained how to conduct an accurate interview – so they are just winging it based on their life experiences. No wonder, the studies show that interview accuracy is basically as effective as rolling dice.”
Deutsch believes a proper interview process includes in-depth work style and personality assessments. As with any business decision, having the right information is critical. Work style and personality assessment testing can help reduce bad hires in three main ways:
Identify potential red flags. An in-depth work style and personality assessment can discover issues that are sometimes overlooked during the interviewing process and can quantify an intuition or feeling the interviewer may have about a particular candidate. It can be used to identify potential red flags concerning behavioral issues, help understand how to manage individuals for greater work performance and compare interpersonal dynamics of teams, departments, and candidates.
Optimize employees’ work performance. An in-depth work style and personality assessment can provide extensive information on an individual’s ability to work with their job responsibilities, team dynamics and company culture. Additionally, the assessment can show effective strategies to gain optimal performance from that individual within their particular work environment. It can also be employed to quickly identify the most effective management style for a new employee or predict how team members are likely to interact.
Ensure you have the right people in the right positions: Additionally, in-depth work style and personality assessments can be utilized in rehires, or situations which call for employees to re-apply for their current jobs, as in the case of a corporate merger or restructuring. An in-depth work style and personality assessment can also ensure that your company continues to have the right people in the right positions and distribute assets and talents effectively.
How does Deutsch define a good hire?
“I would define quality of hire as a candidate who hits or exceeds your specific quantifiable outcomes at the 90-day or six-month timeframe with a set of behaviors and style that is consistent with your organizational culture and values,” says Deutsch.
Assessments and professional feedback is not just for the Fortune 500 companies, but can help organizations of all sizes with avoiding bad hires.
Lighthouse Consulting Services, LLC helps a variety of companies avoid bad hires through in-depth work style and personality assessments and professional interpretation of the results. Not only does this help avoid bad hires, but these assessments also help companies get the most out of new hires from day one. These assessments are tremendous productivity tools for managers who want high-performing teams.
In addition, Lighthouse Consulting Services, LLC provides 360-degree feedback surveys. Be warned: The amount and level of training of those providing the 360-degree feedback can impact the level of accuracy of the feedback.
Without guidance from a trained professional, bias may distort the value of the feedback. To get the full benefit, leaders need to be debriefed on the 360-degree survey results by trained professionals such as those who are part of the Lighthouse Consulting team.
Bottom line: When professionally conducted and interpreted, the results assessments help produce can be significant. But without a trained professional to help interpret the assessments, the value of their results is severely diminished.
When you are open to having a conversation about how our in-depth work style and personality assessments could help your team, please contact us at 310-453-6556, extension 403.
Permission is needed from Lighthouse Consulting Services, LLC to reproduce any portion provided in this article. © 2023
Dana Borowka, MA, CEO of Lighthouse Consulting Services, LLC and his organization constantly remain focused on their mission statement – “To bring effective insight to your business”. They do this through the use of in-depth work style & personality assessments to raise the hiring bar so companies select the right people to reduce hiring and management errors. LCS can test in 19 different languages, provide domestic and international interpersonal coaching and offer a variety of workshops – team building, interpersonal communication, stress & time management, sales & customer service training and negotiation skills as well as our full-service Business Consulting Division. Dana has over 30 years of business consulting experience and is a nationally renowned speaker, radio and TV personality on many topics. He is the co-author of the books, “Cracking the Personality Code”, “Cracking the Business Code” and “Cracking the High-Performance Team Code”. To order the books, please visit www.lighthouseconsulting.com.
If you would like additional information on this topic or others, please contact your Human Resources department or Lighthouse Consulting Services LLC, Santa Monica, CA, (310) 453-6556, email@example.com & our website: www.lighthouseconsulting.com.
Lighthouse Consulting Services, LLC provides a variety of services, including in-depth work style & personality assessments for new hires & staff development. LCS can test in 19 different languages, provide domestic and international interpersonal coaching and offer a variety of workshops – team building, interpersonal communication, stress & time management, sales & customer service training and negotiation skills as well as our full-service Business Consulting Division.