While much attention has been given to the importance of hiring talented employees, issues around the cost of bad hires are of increasing importance to both HR professionals and their organisations. In this first of a two-part series, US recruitment expert Dr John Sullivan looks at strategies for reducing the number of bad hires and improving candidate assessment
No process that involves humans produces perfect results. Even hospitals, with all the quality control systems they implement, still have a measurable failure rate. So it’s no surprise that the traditional selection process that most managers use for selecting and assessing which candidates to hire is no exception.
What is startling is that, although the interview and screening process has a very high failure rate, almost without exception managers and HR professionals alike treat it like it was a perfect process with a zero failure rate. In fact, it is common for 20 per cent of all hires to be bad hires, while in some cases they can be 50 per cent and above.
Because most managers and recruiters assume upfront that the hiring process literally never fails, they almost always omit checks and measures to ensure that the process continually produces great hires. The four essential but rarely employed elements of successful hiring are to:
• Assume upfront that some percentage of new hires will be mistakes, and as a result have a formal process for the early identification of bad hires. (For example, many do no performance assessment until the end of the first year.)
• Have a process for rapidly releasing bad hires if they can’t be fixed.
• Have a formal set of metrics and a mechanism for identifying the ratio of successes to failures.
• Have a formal feedback loop which allows the hiring process to learn and improve as a result of any hiring errors.
Interviews are inherently misleading
The primary area where new hire errors occur is during the interviewing process. From the start, the basic foundation of the interview is based on the premise that during the interview, candidates are acting normally and telling the truth. We all know that candidates routinely stretch the truth during interviews, as they try to put forth their best image. In a similar light, companies also exaggerate by putting forward only positive aspects, in order to look good to candidates.
As US recruitment expert Michael McNeal once pointed out, the entire selection process is ill-conceived. It is designed to find faults with the candidates as opposed to finding their positive aspects. Research studies also demonstrate the numerous weakness with interviews. In fact, the statistical performance of traditional interviews is so bad that it’s easy to wonder why they are used at all.
The selection process is an ‘actor versus actor’ game. Candidates try to appear like the person they think managers want, and managers try to appear like the firm they think candidates want. As a result of these all-too-common problems, the key to great hiring is to either minimise the unnatural aspects of interviewing or to substitute different assessment processes which are more objective and accurate.
Solutions to hiring turkeys
Assessing cultural fit. Interviewers can of course ask the candidate directly if they believe they would fit the firm’s culture. Unfortunately, almost everyone answers yes to that obvious question. Another problem is that the culture that the interviewer describes is often a sanitised view of the real corporate culture. A better approach is to provide candidates with a long list of cultural factors and force them to select and rank the top five under which they do their best work. They should also be asked to rank which ones are intolerable. The forced ranking process requires the candidate to identify their own cultural needs, and it tells you their ideal cultural fit. With this information, the recruiter and the manager can then more accurately assess whether your job actually fits the candidate’s cultural needs and expectations.
Assess their ability to work in a team and with others. There are few jobs in the corporate world where an individual can survive as an individual contributor. If interaction with others and teamwork is essential, the candidate’s ability to work with others must be assessed. Rather than just asking them if they are a team player (any fool would answer yes), instead, give them a real problem that requires teamwork and cooperation, one that they would face during the first month on the job. Ask them to walk you through the steps on how they would handle the problem. If they minimise or leave out steps where they would be expected to coordinate, consult, and get input from others, you know you’re in trouble. Another option is to provide them with several different scenarios on how a different problem can be approached and ask them to pick the one closest to the one they would actually utilise.
If the scenarios include both cooperative and individual contributor behaviours, you can be more comfortable with the candidate if they select the one that involves teamwork and cooperation. In addition, you can ask the candidate to list the situations where they would act on their own to see if any run counter to corporate expectations.
A verbal simulation is a must. The very best approach you can use to identify if someone can actually do a job is to literally put them in the situation where they have to do the job. Although that’s not always possible, you can give candidates something very close to it, like a written or verbal simulation. Providing every candidate with a verbal simulation is recommended.
During the interview, ask them to provide a real problem they are likely to face during the first month or two in their new job. Tell them you are looking for problem solvers, and ask them to walk you through the steps they would use to solve this problem. Probe and ask why they took that approach, and make sure that they included collaboration and involving others. Check to see if they included effectiveness measures and continuous improvement elements in their solution.
Identify their decision criteria for accepting. If you know upfront what criteria the candidate will use to assess your job and your firm, it is easier to provide them with information in those areas. Before the interview, ask the candidate directly to list and weight their decision criteria. Once you know what makes a job a great job, you can then provide the candidate with information in those areas. For example, if they like rapid promotion, you can provide them with a best case scenario identifying the average and the quickest time that any new hire has been promoted in the last two years. If they want rapid learning, you can provide them with a list of the resources, courses, and mechanisms you have for learning. The key here is to give them information on the things they care the most about so that they won’t accept a job and then later end up not liking it.
Focus on the future. It’s a fact that most interviews in general, and behavioural interviews in particular, focus on the past. The problem with past focused interview questions is that the way people acted in the past at another firm might not reflect how they would, or even should, act under the current conditions in your firm.
You can identify how a candidate will handle current problems with a verbal simulation during the interview, but if you want to see if they are forward looking you need to ask the candidate for their forecast or view of the future (for example, upcoming changes that will be needed in the function, the company, the product or the industry). If the job requires someone with insight, it’s essential that you ask them for their view of the future. In addition to asking them directly, you can give them a job-related situation and ask them how they would expect to approach the problem differently as a result of upcoming changes in the industry. It’s not as important that they get the forecast correct as it is that they continually think about the future and the changes that it might include. Anyone who says (or demonstrates) that they haven’t thought about upcoming changes should be rejected.
Avoid the nervousness of interviews and hold a ‘professional conversation’. Interviews are scary situations from almost all candidates and even for a few managers. The set-up with candidates versus managers in a conference room or office is incredibly imitating, especially with group interviews. The problem is that the behaviours and the answers you get in this unnatural situation do not necessarily reflect the real candidate. An alternative approach is to find a location and situation that is more natural and more relaxed, such as a café or any casual location where the candidate feels more at ease, which lends itself to a ‘professional conversation’.
Ask them to show their work. A candidate’s memory of their work is not always very good during an interview, and the high degree of nervousness is likely to lead to inaccurate or partial answers to your questions about their work. Instead, ask the candidate to bring examples of their work (assuming there are no legal conflicts) to show and discuss. By allowing the candidate to demonstrate their work, you both raise their comfort level and get to see what they actually did. It’s much easier to assess quality when you have the work in front of you.
Rely heavily on top performer referrals to avoid being fooled by strangers. Most candidates are unknown to the manager prior to applying for a job. This in essence makes them strangers. When you are interviewing candidates who are essentially strangers, even the best recruiters and managers are likely to be fooled. This is because the candidates are acting on their best behaviour, and there are only a few hours of actual assessment time to find out what the candidate can actually do. That’s why it’s important to avoid, wherever possible, interviewing strangers.
Avoid the assessing strangers problem by filling your candidate pool with ‘non-strangers’. Although this might seem difficult, it’s actually quite easy to do if you rely heavily on employee referrals (especially those that are made by your current top performers). Because these referred candidates have already been pre-screened and pre-sold by your own top performers, you are indirectly already familiar with these candidates and their work. The only caveat is that you must be sure that your own employees have worked directly with the candidates they have referred. The on-the-job success rate of top performer referrals is generally 50 per cent higher than that of stranger candidates.
Ask them how to identify other top performers. High potentials invariably know what it takes to be an ‘A player’ in their job. If you concur, ask the candidate during the interview what criteria they would use to assess or identify whether a co-worker was a top performer. You might also ask them to use those criteria to assess themselves and to provide evidence on how they meet each. Candidates who are unable to articulate top performer assessment criteria (or those who have not thought about these criteria) are unlikely to be great hires.
Don’t rely on references. It’s not uncommon for managers to think that references will tell you the straight scoop on what the candidate is really like. But rest assured that most people who give references provide less than the total truth. Some managers even directly lie, in the hope that you’ll take this ‘turkey’ off their hands. If you want great hires, don’t rely on the opinions of strangers. Instead, find out directly for yourself exactly what the candidate can and cannot do.
Offer night or weekend work. If you are really serious about proving whether an individual can work with your team, consider hiring them as a consultant for few evenings or even a weekend, and have them work literally side by side with your team. Even though it’s only for a brief period, both sides generally know pretty quickly whether there is a fit. In addition, if you are a little-known firm, once they get to know your team on a face-to-face basis you’ll find that selling candidates becomes much easier, because they really get to know you, your team, and how your organisation works.
The cost of bad hires
Australian businesses that cut corners when recruiting face tens of thousands of dollars in losses, according to a recent white paper. Published by Drake International, it found that hiring the wrong person can cost businesses between 30 per cent and 200 per cent of a person’s annual salary. For an employee on a wage of $35,000, for example, the cost can range from a minimum of $10,500 to as much as $70,000. It also found that one in four hiring exercises ends in failure.
Most HR Managers underestimate the cost of bad hires, according to Danielle Fairclough, national manager for Drake Personnel. “There are the obvious tangible costs to consider such as salary, fringe benefits and training however it's the hidden costs that really make the difference,” she said. “Lost sales opportunities, low staff morale and poor customer service are common by-products of mis-hire. These costs are generally unbudgeted for and come as a nasty surprise.”Informal and ill-defined hiring practices, a lack of cultural fit and unclear job descriptions as the main reasons for bad hires, according to the report, Effective hiring - practices to reduce the risk of mis-hire. The below table highlights a range of typical costs associated with employing someone for a secretarial position worth $35,000 per annum who reports to a manager on $55,000 per annum. The figures are based on an actual case study from the insurance industry.