The Unexpectedly High Cost of a Bad Hire

http://www.linkedin.com/today/post/article/20130716151946-2967511-the-high-costs-of-a-bad-hire-and-how-to-avoid-them

by taylorbuley • 13 years ago

46 55 13 years ago

mathattack5• 13 years ago

"How costly? The U.S. Department of Labor currently estimates that the average cost of a bad hiring decision can equal 30% of the individual’s first-year potential earnings. That means a single bad hire with an annual income of $50,000 can equal a potential $15,000 loss for the employer."

I think this dramatically understates the cost. What's the cost when 3 people quit because you hired a PM that threw them under the bus in front of a client? What's the cost when 2 women quit because they were sexually harassed? What's the cost when an employee defrauds a client?

The cost of a hiring mistake is not a fraction of a years compensation, it's many multiples of a years compensation. This is one reason many places let slightly sub-par people stay.

r_m_adler• 13 years ago

sorry the last sentence seems to be a non-sequitur. Why does the high cost of a hiring mistake justify letting slightly sub-par people stay?

eigenvector• 13 years ago

Because they might be replaced with someone who is much, much worse. Not awesome vs. complete disaster.

astral303• 13 years ago

Presumably because of the risk of replacing a known slightly sub-par quantity with an unknown truly bad hire.

GeneralMayhem• 13 years ago

Very risk-averse people might prefer a known meh to an unknown potential apocalypse.

matwood• 13 years ago

Known quantity versus unknown.

benjohnson• 13 years ago

This has been my experience - one unethical employee ran off with our best customer that represented about 40% of the business.

I now value ethics above all else in working relationships. Two ways I perhaps can quickly determine ethics: Watch how they interact with people in low status positions (food servers, gas attendants) versus how they interact with you. Also ask them about how they determine morality - if they give you a blank stare then perhaps take that into consideration.

nightski• 13 years ago

Just a note: If you value morality and ethics so dearly then make sure that the company is aligned with these expectations. All too often a company looks for moral employees while it will screw them over when it is convenient. Because hey, it's business right?

vonmoltke2• 13 years ago

When did someone who runs off co-workers or gets the company in legal trouble become the "average" bad hire? In fact, when did this become a common occurrence for recently-hired people? Everyone I know of in 11 years or professional experience who fits this category were long-time employees of the company before these issues arose.

mathattack5• 13 years ago

The truly bad sometimes find ways of covering their tracks. I've seen bad newbies, and bad oldies.

Even the "average" bad hire costs a lot more than what the article suggests. $15K for a $50K job seems very low. What's the value of the "average" bad hire turning a client reference into an angry client? Or having them hire someone very bad for one of their positions? Or undermining company morale?

jstelly• 13 years ago

I totally agree that this dramatically underestimates the cost of a bad hire. It's more accurate for a hire not hitting expected performance, but in my experience a bad hire has a much more extreme worst case. This is especially true in programming because the effect of an individual's decisions gets amplified by large numbers in many cases (the number of internal and external customers downstream of these decisions).

ameen2• 13 years ago

Does a bad hire explicitly mean those who engage in office politics, lower the morale, engage in fraud, malice, etc.

Does it mean an entry level dev/intern who is just learning the ropes and might commit a few mistakes out of genuine incompetence/inexperience rather than malice.

I see most hiring managers, HRs and what have you intimidate potential entry-level interviewees that if they weren't upto and in some cases over the company standard they'd end up costing the company a lot.

potatolicious2• 13 years ago

I take it to mean both. They're both bad hires, though obviously in different ways and degrees.

Generally speaking though, in places I've worked, simply being not up to snuff is not in and of itself evidence of a bad hire.

If you're not competent, cannot learn quickly, or are unwilling to train and learn, then you may be a bad hire.

ameen2• 13 years ago

I can understand if they cannot learn quickly but I haven't come across or ever heard of hires unwilling to train. Why would entry-level employees be unwilling to train?

protomyth• 13 years ago

The first one is just bad, but sadly common.

The "entry level dev/intern" really depends on a lot of factors. If it is truly and entry level position, then you should expect mistakes to be committed and you should be paying them less and have some infrastructure to handle the mistakes and training. If they learn, they get more pay. If they cannot learn, then they get canned. You're taking a chance when you advertise that position and should price the job accordingly.

jellicle• 13 years ago

We found it and needless to say, he was not hired.

I guess it's good to know that Hootsuite considers consuming alcohol during non-working hours - while attending a conference intended to improve one's social media skills - to be a firing offense. They should probably include that in their job ads to make sure "bad" candidates don't apply.

LanceH• 13 years ago

They didn't fire him. They just didn't hire him. Tweeting that you're drunk going into the interview says a few things: you don't take it seriously, you aren't preparing as best you could, and possibly that you're driving drunk to get to the interview.

ntumlin• 13 years ago

While I agree with you, the article mentioned it was a phone interview, so hopefully he wouldn't be driving drunk. I suppose he could be driving drunk while talking on the phone, which would explain some of the people I see on my morning commute.

gregors• 13 years ago

I would have seen how the guy did on the interview.

steverb• 13 years ago

I think getting drunk prior to going for an interview is an obvious no-hire. It shows piss poor judgement.

On the other hand, if you're looking to work at an employer that doesn't mind how much alcohol is in your bloodstream while at the office, it might be a good way to filter out places you don't want to work at.

vehementi2• 13 years ago

What if the person in fact has amazing judgment and there were circumstances you weren't aware of and that e.g. there was good reason for him to get drunk at that conference (networking, other opportunities, etc.)? Would you be ready to admit your deductive reasoning ability is seriously flawed?

nawitus2• 13 years ago

Interesting social phenomenon: nicotine and caffeine are allowed drugs on the job, but alcohol is not.

potatolicious2• 13 years ago

It stops being "during non-working hours" if you're drunk when you roll into the office. I personally don't care what you drink and how much, but you should not be intoxicated when you walk through the door.

The tweet wasn't "I got so drunk last night, yo!" it's "I'm going into this thing drunk".

taway2012• 13 years ago

He quoted the tweet as is, which led me to the identity of the poor job seeker who had the misfortune of applying to work at this company. Looks like bad form to me.

I'm curious what about the tweet thing turned this guy off.

vehementi2• 13 years ago

Yup, it shows... let's see going through this thread... it shows that the company had piss poor judgment, doesn't take hiring seriously, aren't prepared to hire the best people, ...

quacker• 13 years ago

The ability to work well with others is a skill that benefits any workplace. An obvious way to gauge this is to contact the candidate’s references. But, why not take it a step further and dig into a candidate’s social media profiles?

Ehh. I like to keep my personal life separate from my professional life. The way I conduct myself with friends is not how I interact with coworkers.

An employer who insists Facebook and Twitter are among the best indicators of compatibility around the office should probably review how well they actually work with others.

nawitus2• 13 years ago

The problem with these 'how to hire' articles is that they're not based on empirical evidence. Therefore they might be just as wrong as Google's interview puzzles (which were found to be worthless).

So if you’re hiring for an IT role, find and talk to an IT person about what makes a good team member.

Not sure why that's relevant. People can be good team members without really thinking about what makes a good team member (and vice versa).

Savvy HR departments are already looking through candidates’ Facebook and LinkedIn profiles. I recommend going as far as checking a candidate’s Twitter feed to gain insight.

That's illegal in most of Europe. It's pretty dangerous to check somebody's personal social media feeds. The interviewer will probably be affected by the candidates politicial or ideological positions (possibly subconsciously).

People tend to be the most alert and thoughtful during this initial stage of the job application process.

And some people submit a lot of job applications and don't have time to pay perfect attention during that process (even if they are alert and thoughtful on the job).

auctiontheory3• 13 years ago

Feels like an oversimplification. One issue is your work output. An independent issue is the team-building and motivating (or demotivating) effect you have on your co-workers. Tough to find someone who is a "A+ player" on both dimensions, while also affordable, honest, loyal, etc. Everyone has some limitation.

This article seems to promote risk aversion (and HR consulting services) without providing usable insight.

sahrizv• 13 years ago

In my opinion, for product based companies, it is a small subset of brilliant employees which bring the most value to the company.

Although the goal is to maximize such hires, due to the broken(both ways) nature of the hiring process, the company ends up hiring many employees who turn out to be average, and some even go on to become the subject of this article- mediocre.

More importantly, following this line of thinking, the cost incurred due to a manager causing the top talents to leave the company is much more(esp. compounded cost), than the cost of hiring a bad employee.

mitchdumke• 13 years ago

I love the secretary test! Our CEO at Lucidchart used to sit right at the front door (best natural light) and it was always funny to watch how potential hires would interact with him. The smart ones recognize his face and immediately engage, and others don't say anything on the way in or out. Who doesn't visit the website of their potential employer and at least read up about the management team? Especially when at the time it was a startup of 10 people!

johnward2• 13 years ago

Are you saying you don't hire people because they didn't instantly recognize your CEO? Honestly I could look up the company, see some standard headshots, but I'm not sure I would instantly recognize them in person. Sounds like someone has a "I'm so important everyone should know me" complex.

auctiontheory3• 13 years ago

You might miss out on some terrific applicants who also happen to be face-blind. (Or just blind.)

johnward2• 13 years ago

"3. The curveball: Hide an unexpected question in the fine print." So in addition to putting you through pointless interview puzzles they also want to send me on a scavenger hunt?

RogerL• 13 years ago

I found this article extremely helpful. I now know the CEO of Zappos thinks he can snoop into my personal life, because hey, it can cost him some money if he doesn't. What is my privacy in the face of that?

auctiontheory3• 13 years ago

If I remember the book correctly, Tony Hsieh credits his success to insights gained from going to raves and doing drugs. (Ecstasy, I assume.) So he's probably not looking for Puritans.

ignostic2• 13 years ago

The author starts off with some data, but it's far from complete. $15k in lost productivity for a 50k hire? Sure, then there's the retraining costs, potential hits to morale, and then the opportunity cost. Opportunity cost for a bad hire varies, but the profit you could enjoy from a motivated person can be huge depending on their role.

Now then, we get into solutions and suddenly things start getting fluffy. "... find an expert in the candidate’s specific field and get some advice on the best questions to ask." Fluff. This is opinion piggybacking on fact.

There's a huge body of research that could tell you how to hire better people. If you've read any of it, you'll know that unstructured interviews are not the way to go! You're essentially testing a person's ability to perform in an interview rather than their ability to do the job.

I'm continually shocked that businesses who rely on their employees for every penny of revenue have no idea how to hire the best employees. Everyone thinks they have some sort of sixth sense gut feeling that can guide them to the right people. Some of the research in this field is very good, and it could be better if business owners and managers paid it any mind.

dsjoerg• 13 years ago

Do you have any links handy to some of this research? I'd be interested to check it out.

ignostic2• 13 years ago

I'm not joking when I say there's a body of research. You can find a lot of it in journals that deal with organizational behavior, strategic management, and strategic HR.

I mentioned specifically the oft-used unstructured interview. Here are some links for that point:

Meta-analysis: " structured interviews produced mean validity coefficients twice as high as unstructured interviews" http://onlinelibrary.wiley.com/doi/10.1111/j.2044-8325.1988....
Meta-analysis: All interview validity estimated at .19, but structured interviews estimated at .39: http://onlinelibrary.wiley.com/doi/10.1111/j.2044-8325.1989....

Outside of boring journals and texts that you might not have access to, we can always just Google Scholar for things like "employment selection instrument": http://scholar.google.com/scholar?q=employment+selection+ins...

droithomme• 13 years ago

So how I read this is he stalks applicants on Facebook, won't hire people who drink socially during their own personal free time, and demands that applicants reveal the web sites they hang out on, or it's an instant no hire.

None of these things have anything to do with capability to do a job.

Sure, bad hires can be costly, but this article's advice is terrible and the author comes across as a crazed tyrant.

ethomson• 13 years ago

And how I read it is that somebody who shows up drunk to a job interview does not use good decision making skills and is likely unreliable.

I love a beer in my time, and I would be happy to enjoy a beer with my coworkers in our time, but I find it hard to believe that somebody who shows up drunk to an interview (even a phone interview) is a "good hire".

chrisbennet• 13 years ago

"How do you find your “cream of the cream”? What are your unique or tried-and-tested hiring strategies?"

Am I the only one who was thinking "How do you expect to hire the “cream of the cream” if you only pay $50K a year?"

The Unexpectedly High Cost of a Bad Hire

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