In a study of over 20,000 newly-hired employees it was found that over 46% of them failed (quit, were fired, or had two or more negative performance reviews) within 18 months.
The conservative end of the spectrum puts the cost of a poor hire at 30% of that person’s salary (The high end of the spectrum places it as several times a person’s salary). Presently, the average professional salary in Canada sits at $78,000, putting the average of a poor hire at roughly $23,400.
A cost that has near coin-flip odds attached to it, each time you hire.
If you called your boss right now and made the argument that you needed to hire someone, you would most likely get the OK. However, if you called your boss, proposed an idea, told your boss the idea had a 50/50 shot of failing, and that the failure would lose the company tens of thousands of dollars, something tells me you would get a different response.
Even though when you say the first thing, according to the numbers, you are essentially saying the second thing too.
It’s easy to see that hiring is broken. What isn’t as easy to see, even to those with a ton of hiring experience, is why it is so fundamentally broken.
I began my career as a recruiter in late 1998. Since then, I have made hundreds of placements in organizations across all sizes, stages and industries. Collectively, my team and I have interviewed over 10,000 candidates. I’ll argue that we have more experience when it comes to hiring than any single person reading this. However, despite all that experience, it wasn’t until I pursued my Masters in the Psychology of Leadership that I learned why hiring is so universally ineffective. It comes down to two overlapping phenomena: Bias and Noise.
Bias is a predisposition for or against something. When bias affects an outcome, it is viewed as an error of judgement. A person's predisposition causes them to think a certain way, creating a consistent form of inaccuracy. Noise, by comparison, is an error of procedure. Here, differences in the steps, processes, and tools used create a randomness that creates even more inaccuracy.
The Journal of Occupational and Organizational Psychology states 52% of hiring managers decide whether to hire a candidate within the first 5 minutes of an interview. The rest of their hiring process becomes pure confirmation bias, as they unconsciously seek data to make them feel better about their initial snap decision.
According to Brandon Hall Research, 69% of companies who struggle with hiring effectiveness cite a broken interview process as having the greatest impact on their struggle. In fact, the research found that organizations who lack a standardized hiring process, are five times as likely to hire poorly.
In short, bias and noise are killing companies’ ability to hire effectively and hiring ineffectively is causing problems pretty much everywhere else. To keep you from being one of these cautionary tales, I’ve put together the 4 steps you must take to fully eliminate both bias and noise from your hiring efforts.
- Quantify your Culture: culture is not nap pods and meditation rooms. It is not a ‘work hard / play hard’ mentality nor is it tied in any way to your benefits program or work-from-home policy. The definition of culture is, “The values and beliefs that separate one group of people from another.” You must decide what your values are and then quantify how you can tell if someone is living them. These should be turned into questions you will ask each applicant to get a feel for their degree of alignment with your existing culture.
- Quantify Competence: counting the number of keywords on a person’s resume that match your job description is easy. It’s also ripe with bias. If an applicant matches more keywords than another, it is common to enter their interview looking for reasons to hire them. There is a difference between someone with ‘10 years of experience’ and someone with ‘1 year of experience, ten years in a row’. The only way to tell the difference is to forget the skills you think you need and focus on the problems you actually need solved. Then, quiz each applicant on how they have solved that problem in the past. If their answers lack substance, you may need to keep looking. Remember, you need proven competence, not proven resume writing ability.
- Understand Behavioural Profiles: You have a behavioural profile. So does each of your applicants. Those profiles don’t always align seamlessly, which can cause interviews to go sideways. For example, we have seen many Red-oriented leaders write off candidates for not ‘pounding the table’ enough in support of their candidacy. Reds hold the Convincing bias – they require debate to feel comfortable deciding something. Green-oriented candidates feel debate is rude and Yellow-oriented candidates can grow defensive if they feel they are being attacked in an interview. You can easily miss out on a future top performer by inadvertently triggering them in an interview, misreading their response, and judging them falsely. Whether you use DiSC, Insights or even our WorkplaceEQ framework, an investment in behavioural profiling can save you tens of thousands of dollars in hiring mistakes.
- Hire The Same Way – Every Time: the circumstances surrounding each hire will be different. All this does is increase the importance that you remain consistent in how you hire. As I say to leaders all the time, “noise is eliminated when norms are established.” It does not matter whether you are hiring a front-line worker or an executive, your process must remain consistent across all hires. It is tempting to make exceptions based on the nuances of a role. Granting one exception makes granting future exceptions more likely, plunging your hire process into chaos over time.
Finally, it is important that you fundamentally understand the difference between the reason you hire versus the purpose of hiring. The reason you hire is to fill a vacancy. The purpose of hiring is to protect and grow the engagement level of those you already employ. If I had to call out a single variable responsible for more poor hires than anything else, it would be ‘the pain of the empty chair.’ Leaders are acutely aware of the stress, overtime and gaps in customer service that grow with each day a role stays vacant. This can easily influence them to look past obvious reasons to not hire someone. “I can mold them”, “We have a better culture than where they were last”, and “Everybody deserves a second chance”, are the famous last words of a stressed-out leader desperate to make their short-term pain go away.
If you are aware of your biases, you can override these impulses. If you have an airtight process that never changes, you are forced to stay more disciplined. Eliminate bias and noise and one of the most broken processes in all of business may cease to be an issue for you.
CareerBuilder puts the average cost of a poor hire at $14,900. They estimate the cost for every good person that leaves because of the poor hire at $29,600. Considering 80% of ALL turnover is due to poor hiring decisions, eliminating bias and noise in your hiring process may be a recommendation you take seriously.