The Cost of a Wrong Hire
Hiring the wrong employees can be expensive. According to the Center for American Progress, to replace an employee who earns $75,000 or less, it will cost between 10-30% of that employee’s annual salary. Therefore, to replace an employee earning 50K a year, it would cost the employer between $5,000-$15,000.
Yes. You read that correctly. $5,000-$15,000
If hiring the wrong employee costs us so much, what measures can we take to help find the perfect fit?
“Hire slow, fire fast”
If the cost of hiring a new employee is expensive, how much does a disengaged employee cost you? How much does it cost you to have the wrong person in the wrong role? That is the heart behind the philosophy, "hire slow, fire fast." If an employee is not a good fit for your company, everyone suffers, including the employee in question. Advocates for the "hire slow, fire fast" approach argue that you should let employees go when it's clear they aren't a good fit. However, most companies hang on to bad employees much longer than they should, and it creates an environment where everyone loses.
Greg McKeown, author of Essentialism, praised the idea of "hire slow, fire fast" in his Harvard Business Review article. McKeown pointed out three main reasons that this philosophy can be helpful to the health of a company. The "hire slow, fire fast" concept:
Protects each employee-even those who are not a good fit for the company
He argues that business owners need to be “absurdly selective in who they hire,” and also, if an employee is not a good fit, companies should “fire humanely.”
McKeown goes on to say,
“If we "hire slow, fire fast" we can increase what Reed Hastings, CEO of Netflix, has called the “talent density” of our organizations. It is not easy. It takes having hard conversations. It takes leadership. Still, if we can do it then, ultimately, people, teams and organizations win.”
In another article, author and business coach, David S. Kennedy states that many business owners take too long to fire a bad employee. Kennedy believes, based on conversations with his clients, that:
“The average firing occurs somewhere between six and 18 months after the business owner knew the employee was consistently performing poorly, consistently non-compliant, poisoning the workplace and negatively affecting others in it, or otherwise stinking up the joint.”
Kennedy also believes that procrastinating the firing of a bad employee creates an urgent need to hire fast to replace that employee, thus creating a vicious cycle. Instead of rushing to fill a job, Kennedy recommends taking your time to find a good fit for your company.
Erin Cramlet, senior director for HR with Stryker South Pacific Office, is often asked how they hire and manage their employees so well. Cramlet says, “My response is always the same: we hire really, really well. We are passionate about recruitment and spend an inordinate amount of time focusing on finding the right person.” Cramlet tells candidates that Stryker is interested in a “mutual long-term fit,” and establishing if a candidate is a right fit or not takes time.
Several years ago I had a friend apply with Chick-Fil-A to be an Owner/Operator. I remember my surprise when, while describing the hiring process, he said they interviewed his wife. He explained that before they would sign off on him owning and operating his own franchise, a highly demanding venture, they wanted to make sure his wife was all in.
Partner support is just one of the many reasons companies opt to engage in spousal interviews with the significant other, and while this idea may seem controversial to some, many experts swear by it.
An article in the New York Times pointed out that many companies are interested in assessing the partner or spouse as part of the package when hiring executives, especially if their job entails a large social role. The article goes on to say, “Search committees are looking at how comfortable spouses appear with people, how supportive they seem about the job prospect, and whether they will be a match with the organizational culture.”
Screening an applicant’s spouse for social aptitude and the degree to which they are a cultural fit for the company can be important, but the benefits are not all one-sided. Allowing the partner a chance to ask questions of the potential employer is also a driving factor.
Dave Ramsey, author and American businessman, believes that a spousal interview is helpful for the spouse as well as the company. He recommends a casual dinner with the potential employee and his/her partner in order to afford the spouse an opportunity to ask direct questions about the job and the company. As Ramsey said in his blog 6 Steps to a Good Hire, “One of the last steps you should take before a hire is an interview with the candidate and his/her spouse. The spouse will tell you pretty quickly whether the position will really work for the family.”
We have all heard the old adage, “It’s not what you know, it’s who you know.” While there is a nugget of truth to that statement, I much prefer the wise saying of one of my favorite graduate professors,
It’s not who you know, it’s who knows you.
Referrals are the leading source for quality hires, or as Liz Ryan, an HR professional, wrote in her Forbes article, “Employee referral is the best recruiting channel I know.” In fact, 70% of employers and recruiters believe that referral hires fit their company values and culture better than non-referral hires. Ryan argues that “An employee referral program is a temperature gauge on your culture. If your employees are lobbing in their friends' resumes like crazy and you're hiring a lot of them, your culture is great.”
Other benefits include increased retention, greater job satisfaction and a more time and cost effective hiring process.
Because of these advantages, many organizations are willing to invest in a referral bonus program. In fact, 69% of organizations have referral bonus programs, though the amounts of the bonus vary. Bonus checks can range from $250 to over $5000, with the majority of bonuses paying between $500-$2,500. Companies also offer other incentives like gift cards, time off and recognition in front of their peers. The point is that you can get creative and match the incentive to your unique culture and team, but the fact that you are willing to invest in the employees who refer their friends to you will speak volumes to them, and benefit you.
The traditional approach to hiring is to create a job and find a candidate to fill it, but many experts recommend the opposite. Instead find top talent and create the job around them. Sheryl Sandberg, COO of Facebook, says, “At Facebook, we try to be a strengths-based organization, which means we try to make jobs fit around people rather than make people fit around jobs.”
Stryker, the Fortune 500 medical technology company mentioned earlier in this post, also uses a Strengths-Based approach.
According to Stryker's HR director, Stryker “focuses heavily on talent management, and in particular, the identification, assessment and selection of individuals based on their unique strengths.”
Once hired, Stryker continues to use Gallup’s Strength-Based approach to develop their 33,000 employees.
A Hiring Revolution
Imagine if you could identify areas within your company that allow your employees to work with ease, excellence and enjoyment? Even from their first day on the job. What would that do to your retention and corporate culture? With a Strength-Based recruiting approach coupled with a Strengths-Based culture, you can make that dream a reality.
At the end of the day, recruiting top talent and retaining it is the goal of every HR director, recruiter and business owner. High employee turnover costs money. Disengaged employees who are kept on too long cost money. Effective hiring is more than just finding available candidate to fill a job. Experts recommend hiring slow, spousal interviews, quality referrals and a Strengths-Based recruiting approach in order to ensure that you select the very best candidates to welcome into your corporate family.
Interested in adopting a Strengths-Based Recruiting approach but not sure where to start? At ROI, we would love to come alongside you and help you create a custom hiring plan that works for you and your company.
How do you lead teams while they're working remotely?
Download our free guide by clicking here, and you'll be equipped to:
1. understand current research on remote work and the preferences of remote workers.
2. implement best practices for leading remote employees.
3. grow in confidence about your ability to create a highly engaged remote team.
Copyright © 2020, ROI Talent Development. All rights reserved.