One of the biggest challenges for any business is employee turnover. It is frustrating to lose someone you thought would become a great member of the team; there’s also the matter of lost productivity, as the remaining team members have to pick up the slack while you interview replacements.
The Department of Labor has found that a bad hiring decision could cost a business 30-50 percent of the departing individual’s potential earnings. Imagine losing $50,000 to a bad hire.
As a technology leader, recruiting and hiring may not be your favorite part of your job; however, it is critical for the success of your team and your business. In this article, you’ll find some of the biggest reasons why you should devote your time and energy to hiring well… and how to spot red flags before you make a bad decision.
Here are the hidden costs of a bad hire:
Any new employee will take a fair amount of time getting up to speed in their role; many studies estimate that it can take up to a year for an employee to start repaying the costs you paid to hire them.
Of course, for a great employee, that investment is worth it. But someone who leaves or gets fired will never end up paying back the time and money you invested. In addition, someone who isn’t well suited for a role won’t produce top-quality work. This means more errors that take time to fix and slow down processes. Whether they aren’t engaged in the work, or their skills just aren’t up to par, your team is missing out on huge productivity when you don’t hire well.
Negative Effect on Employee Morale
A bad hire can also bring down employee morale, because other employees have to do damage control for the bad hire or feel that their efforts aren’t being supported or matched. This added responsibility puts pressure on top-performing employees, and resentment builds, which can lead to your best people also being less productive and happy in their roles.
If that wasn’t bad enough, an incompetent employee causes client mistrust, and frequent employee turnover looks like corporate instability. Losing a valuable employee or client over frustrating interactions with your team can prove even more costly than letting go of a bad hire.
Restart from Scratch
When a bad hire doesn’t work out, the business must start the recruitment process once again. This recruiting process is expensive when you add up the costs associated with replacing this employee, such as placing ads and hiring recruiters. Even if you are able to hire with relatively low costs, it still takes a great deal of your time that should be spent on generating value instead.
How can you tell if a candidate with be a bad hire? Look for major red flags in the candidate screening process:
This is a big one. If you see errors in the resume or discrepancies in their story, proceed no further. An employee who feels compelled to embellish their qualifications is—simply put—not qualified, and worse, can’t be trusted.
When screening candidates, always check references. The “good vibe” you get from one candidate is not enough to make a hire, yet employers make this mistake all too often. This tendency to hire based on an emotional response to the interviewee is called the Halo Effect—a cognitive bias created by our overall impression of a person that impacts our evaluation of that person’s skill (i.e. “She was really entertaining” = “She will be able to sell product”). In order to buffer yourself from this natural bias, check references. What do his previous employers have to say about his or her personality, skills and work ethic?
Bad Culture Fit
Most hiring managers define cultural fit as, “Do I like this person?” But that’s not culture. Hiring people based on whether or not you could see yourself hanging out with them is a terrible way to make decisions about your business.
Instead of thinking about your personal feelings, read over your company mission and values before interviewing, and frame your questions around their key points. Does this person align with the big picture vision for your organization? Will they foster the kind of culture your leadership is driving towards? Those are the things that really matter.
Poor Communication Skills
Being able to communicate with co-workers and managers is incredibly important, especially in technology where you are usually working as part of a team. If a person can’t express an idea clearly or is a bad listener in an interview, you know they will have the same problems on your team — and that just doesn’t work.
One great way to assess communication skills is to ask the candidate to spend a few minutes teaching you something. The subject matter is irrelevant. You simply want to assess how well they break information down in a way that is easy to understand and how well they can deliver a message based on their audience.
Lack of Necessary Skills
Before starting your candidate search, take a moment to reevaluate the position’s description. If you are recycling this description from a previous hiring round, consider whether it still accurately describes the duties expected in the role. If the position has changed, update the job description to reflect these changes. (It’s annoying, but worth the 5-10 minutes.)
Ultimately, you want to create a clearly defined list of skills absolutely necessary to this position against which you can judge candidates. Make sure the candidate you hire has all of these skills, or who has at least enough related experience to make you confident that they can acquire all of the skills without delay.
For Software Engineers, my post “Epic List of Interview Questions” has some helpful questions grouped by category (e.g., algorithms, web development, product sense and judgment, etc.) to get you started assessing specific, technical skills effectively. And don’t forget to ask other employees in the same department how they would quiz a new hire. Since these employees are familiar with the duties you are hiring for, they are an invaluable resource when preparing to vet a candidate.
The direct and indirect costs of a bad hire can impact more than your bottom line. Productivity, employee morale, client relationships, and the value you are adding (because you are spending time recruiting) can all suffer from a bad hire. The next time you are hiring, don’t be in a rush to get it over with; instead, focus on the long-term benefits of doing an outstanding job and bringing someone amazing on board your growing team.