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Are bad hires killing your business?

  • Publish Date: Posted 11 months ago
  • Author: Maddy Arkins

No business owner or hiring manager wants to hire the wrong person for the job. Yet so many of us do. 

The Harvard Business Review stated that ‘80% of employee turnover is due to bad hiring decisions’. From a financial perspective the US department of Labour stated it costs 30% of annual compensation, whereas the Society for Human Resources Management estimates it can cost up to 5 times a bad hire’s annual salary. 

This sounds crazy until you factor in the wider costs of a bad hire, which impacts five areas of your business: 

1. Your customers

 Bad hires don’t seem to grasp their job responsibilities and even if they do; they are taking short cuts, making customers upset due to their lack of customer focus and not really understanding the impact of their behaviour. According to The Harvard Business Review ‘the cost of acquiring a new customer is anywhere from 5 to 25 times more expensive than retaining an existing one’, therefore one negative interaction with a bad hire may cause that customer to walk away. Ultimately, your brand and reputation will suffer.

 2. The cost of turnover

 These costs range from recruiting, training and relocation costs which all add up to big numbers.

 3. Time spent on performance management

 The amount of time that is wasted per week on managing poor performers is around ‘17% of a manager’s time’ according to a study by HR Morning. Trying to get a bad hire to meet minimum expectations is time consuming and an endless cycle of giving corrective feedback, micromanaging, going through a disciplinary process and paying for sick days.

 4. Your reputation

 Every manager makes a bad hire now and again, however if a manager establishes a pattern of bad hires their reputation may come into question and it won’t be long before the manager is coached out of their job.

 5. Unhappy team

 When one employee is under-performing or doesn’t carry the right company behaviours, it has a terrible effect on the rest of the team as they are burdened with picking up the slack and covering up mistakes. The cultural impact will lead to lower performance of your existing team, morale will suffer and great employees will quit.

 As you can see, it can clearly get expensive!

  So where does it go wrong?

We openly discussed how bad hiring is killing businesses with 50 plus CEO’s and investors at the 2nd FinTech Forum. The response and audience engagement was eye opening! There was an overall agreement that people are their most important asset, but very few people have had formal interview training (Only 4 out of 50).

 While we’re on the hunt to find ‘the right people’, it can go wrong for the following reasons:

 1. We look for the wrong things in the wrong order, and

2. We test for them with little “predictive validity”.

 This is compounded by the fact that everyone likes to think they are a good judge of people. And they “know” within the first few minutes that their person is ‘right’ for the job. The cost of getting it wrong is so high.

 What should you be doing?

During the interview process you should be looking for; values, competency (technical and behavioural) and then experience. Most people do it the other way round and are under-prepared and over reliant on the CV. This leads to an unstructured process based on multiple interviewers and gut feel.

 According to Schmidt & Hunter in 1998 there is a 38% chance of “predictive validity for overall job performance”. That’s 1 in 3 or maybe 2 in 5 at best. Either way it’s not great.

 We at Nicoll Curtin have refined a process for our own hiring over the last two years that gives hiring a success rate of 67% and rising. That’s twice as effective! This includes defining Vision and Values, clear job descriptions (including competencies required), a consistent structured process and different people around the business being involved (both on an unconscious bias and interviewing).

 How can we help you?

There is a reason why recruitment companies exist and at Nicoll Curtin it is to make our clients life easier by removing these bad hires.

 As experts in the industry we will know if a candidate will match the vacancies expectation in terms of experience and competency but what we do really well is match our client’s values to potential hires.

 Offering a consultative approach, we will get to know your business and culture so that when we spot a potential match we can screen them to ensure they match our clients values and fit in with the team.

 If you want to stop making bad hires then check out our contact page for the best team to work with on your hiring needs.