The real cost of hiring the wrong people

What’s the real cost of hiring the wrong employee? Eye-watering, according to the latest research.

Last year online job board Career Builder interviewed over 2,300 US hiring managers and HR professionals and found that three-quarters of them admitted having hired the wrong person for a position, at a cost of up to USD 24,000 each for larger firms.

It’s a similar story in the UK, where replacing an employee costs more than GBP 30,000 – or GBP 4bn per year across the country – not to mention taking an average of eight months to get a replacement up to speed.

But what exactly do we mean by ‘hiring the wrong person’? As employers, we have every opportunity to assess the person sitting at the other side of the desk. While candidates may disappoint on attitude, integration and even attendance, the buck stops with us, so are we missing something more fundamental?

So let’s look at how shifting the focus of recruitment might help us reap long-term dividends.

Breaking down those costs

Before we look at the right way to hire, let’s be clear on what the wrong way can cost us. The monetary cost is plain, and in the UAE is exacerbated by Ministry of Labour legislation requiring employers to pay for visas and repatriation. Plus, if the hire goes bad you’ll also need to pay the visa cancellation fees. In a country that still has a pronounced ‘job-hopping’ tendency, with candidates flitting rapidly from one position to the next, these costs can mount.

But there are other, less immediate costs that can chip away at the foundations of your business. CareerBuilder found that of those companies which acknowledged a bad hiring choice, 52% discovered the candidate had a negative attitude, while 51% found their hire didn’t work well with others. Worryingly, 38% found that their clients outright complained about the new hire. Poor productivity is one thing, but a bad attitude can rub off on the rest of your workforce. If they’re also painting a bad public image of your business at the same time, that could have very adverse consequences for your business.

Poor productivity is one thing, but a bad attitude can rub off on the rest of your workforce.

Talent vs skills

According to workable.com, we’re not falling short in the effort stakes. Based on their research, a good ‘interviews per hire’ metric globally is around 13-14. That’s the number of conversations, in person or otherwise, conducted with all candidates to fill one position.

But asking the wrong questions five times will no more yield the right answers than asking just once. What are we actually looking for, then, when we vet these potential employees? Traditionally, we’ve recruited on a tried and tested search for skills, competencies and previous work experience. Those seem like worthy criteria, so why, according to UAE recruiters Robert Half, do 77% of UAE hiring managers feel they’ve got it wrong in the past?

Skills, competencies and experience belong on a resume, but a resume and an interview are two different things and shouldn’t be confused. There’s a growing school of thought that what we should be looking for in candidates has less to do with their ‘skills’ – what they’ve learned in their career to date – and more to do with their ‘talent’ – the qualities they inherently bring to the table.

However, if you are going to go in search of talent, you first need to know what you’re looking for and what you hope to find. Start by deciding what talents the ideal candidate needs to display. Next up, screen for those exact talents. This is the tricky part. The key is being able to distinguish a talent from a skill – after all, you can teach skills, you can’t teach talent.

So what’s the difference? According to Gallup’s Ken Tucker, talent is ‘a naturally recurring pattern of thought, feeling and behaviour that can be productively applied.’ A strength however, Tucker says is ‘the ability to provide consistent, near-perfect performance in a given activity.’ Keep these definitions in mind when hiring and you’ll soon get in the habit of differentiating between the two in an interview situation.

‘Ready, fire, aim’

Right words, wrong order. The familiar phrase is jarring this way around, yet that’s what many of us are doing when we hire – deciding we have a role to fill, then casting the net for skills and experience, before trying to retro-fit each hire to the needs of the business.

In his book Guts!: Companies that Blow the Doors off Business-as-usual, Kevin Freiberg describes what aiming – before you fire – actually means. It is when you ‘conduct a thorough analysis of the requisite skills, and, equally important, consider the attitudes most compatible with the culture, team, community and position’. Only then should your finger be on the trigger to hire, with a rigorous recruiting process designed to ensure you get the right people.

Talent needs to sit at the heart of recruitment. Talent acquisition experts Gallup have been exploring this approach to hiring and shaping the workforce for years. They define talent as ‘recurring patterns of thought, feeling, and behaviour that naturally equip them to excel in a role’. In a recent article, ‘The rewarding work of turning talents into strengths’, they make some thought-provoking points.

Talent acquisition experts Gallup define talent as ‘recurring patterns of thought, feeling, and behaviour that naturally equip them to excel in a role’.

First, while candidates traditionally build their resumes around conventional skill sets, it seems they would prefer to be using their talents. Only 20% of US workers currently feel they’re doing so. Second, talent may need to be shaped, but investing in it is sound, because unlike acquired skills, talent is inherent and permanent in the individual. While acquired skills are useful, according to Gallup, along with regular practice, they’re most helpful when they serve as amplifiers for employees’ natural talents.

Third, and perhaps most important for us as hiring managers, nobody can be great at everything. In fact trying to become well rounded can breed mediocrity. Gallup notes that with the best will in the world, an employee working outside their natural area of talent will become average at best in that particular endeavour. In their experience the leaders who strive to be competent in the most different areas are the least effective leaders overall.

Building a strengths-based organisation

If that evaluation sounds negative, here’s why it’s actually the opposite. We shouldn’t be looking for well-rounded candidates, but instead should be building a well-rounded team. In developing the workforce, we should strive to fill each position with a talented individual whose abilities can be invested in, shaped and honed to reach their full potential. Imagine a football team made up of 11 seasoned all-rounders; then compare it to a team of 11 gifted specialists who work well together and complement each others’ skills.

Companies who understand this have placed talent-based recruitment at the heart of their hiring processes. Stryker, for example, has gone as far as building the Gallup recruitment philosophy directly into their screening and selection process. Southwest Airlines is another – the company’s talent-based acquisition process is a shining example, as detailed in Freiberg’s book that I mentioned earlier. Even Southwest’s recruitment adverts called for the type of ‘colouring outside the lines’ personality that they knew would be a good fit for their company. They thought deeply about who was a ‘Southwest’ type of employee, then went looking for them.

Unilever, meanwhile, has taken things a step further, introducing artificial intelligence into the mix and asking candidates to demonstrate their abilities in neuroscience games before progressing to the next stage. Robo-advice may be beyond the budget of most firms (and arguably outsources the job of getting to know the candidate) but nonetheless companies should be at least investing time and resources to understand the importance of talent in performance and business success.

Moving away from a traditional hiring process based on skills and experience can be a big step, invoking both resistance to change and a lack of clarity about what ‘talent-based acquisition’ looks like. But engaging a specialist recruitment consultant can help you identify the key attributes and characteristics that your organisation needs, rather than dredging for generic skills and experience, then finding a way to accommodate them.

Moving away from a traditional hiring process based on skills and experience can be a big step, invoking both resistance to change and a lack of clarity about what ‘talent-based acquisition’ looks like.

The next step – managing that talent

There’s more than one benefit to avoiding the wrong hire. Not hiring the wrong person is more than a bullet successfully dodged – it’s a long-term opportunity acquired. Even if the talent is rough around the edges, you’ve invested in a long-term opportunity to shape and polish inherent abilities to achieve mutual success.

In 2015, US firms spent USD 71bn on training. Beyond the huge dollar value of all that learning and development – and the wasted effort if a candidate turns out to be a bad fit for the company – there’s another point. What if the wrong candidate completes the training at your expense, then takes the benefits to your competitors?

An old business anecdote sees two hiring managers turning this problem over. The first asks, ‘What if we train them, and they just leave?’ The second responds, ‘What if we don’t train them, and they stay?’ Both sensible arguments, but the second highlights the importance of talent-based acquisition. Get the hiring right and you can invest in training with confidence.

If skills are the cure – talent is prevention

It’s hard to overstate the importance of hiring the right people, but it’s also impossible to avoid the numbers. The ‘wrong hire’ scenario gives rise to the negative impacts of wasted time, money and effort. Prevention is better than cure, and for these purposes emphasising talent represents the prevention.

Hiring based on talent will find you the right people, with the innate qualities that will benefit your organisation in the long run. Talent, unlike skills or experience, can’t be manufactured, but it’s both transferable and enduring.

We need to be able to focus on the benefits of hiring intelligently, not just on the woes of getting it wrong. In the end, skills and experience matter, but to hire on these criteria alone is to look backwards. Sourcing talent, on the other hand, looks to the future, to what your employees will go on to achieve.

tanvir 150x150 fsAbout the author: Tanvir Haque, Founder of Freshstone Consulting. 
Tanvir is currently the Chief Commercial Officer at Lifecare International, and he is the Founder and Non-Executive Director of Freshstone Consulting. He thrives on developing customer-centric business relationships, and as such he is currently focused on revolutionising Lifecare’s customer experience and driving the company’s digital transformation plans – all with the aim of unlocking Lifecare’s full technology potential. With a career spanning back more than 20 years, Tanvir’s experience has been gathered in professional services, banking, and telecommunications, having worked with PwC in Sydney, Andersen in Sydney and London, and Standard Chartered Bank in London. He relocated to Dubai in 2008 and spent a number of years advising and consulting international businesses on how to drive growth before joining Lifecare in 2015. Tanvir graduated with a Bachelor of Commerce degree from the Australian National University in his home town of Canberra and is a qualified Chartered Accountant and a member of Chartered Accountants Australia and New Zealand.