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Could you sneak £50,000 of unwarranted expenses past your boss?

Countless studies aim to calculate the cost of a poor recruitment decision. They vary according to the source, with the Recruitment and Employment Confederation estimating a cost of more than three times starting salary of the hire. Other studies report between twice – five times the cost of annual salary. Whatever the base data, sample size or credentials of the reporting organisations, there is broad agreement that the cost is “lots.”

With 85% of HR decision makers admitting their organisations have made at least one bad hire, it is clear that this is a widespread problem.

Calculating the costs

The costs of poor hiring decisions will include at least some of the following:

  • Recruitment costs (advertising, agency, HR and hiring manager time)
  • Recruiting the replacement
  • Induction and training of the hire and of his or her replacement
  • Lost productivity of team and manager
  • Staff turnover (in some cases) of other team members
  • Delays, reduced activity/output
  • Customers being neglected or other forms of compromised client relationships
  • Reputational damage
  • Increased errors
  • Detrimental impact on ability to attract other top candidates
  • Management and HR time in managing the exit
  • Severance pay and legal costs of termination

How long is too long?

A study conducted by Agency Central asked the question, “How long would you give a new hire to become 100% effective?”. 79% of respondents thought it took over 6 months. Although we do not have valid data to support this, we assume that the more senior the hire, the longer it will take to “find him or her out” and address the problem. This would mean that the more senior the recruit, the greater the cost of a poor decision. Taking the average UK annual salary of £26,676 (ONS, February 2018) and applying the lowest of the multiples given in the studies reviewed, we find the average cost of a bad hire as:

2 x £26,676 = £53,352

Many managers are given authority to make such recruitment decisions independently, without reference to a senior, without training and with no direct consequences of a bad decision. Compare that with attempting to make a departmental purchase of around £50,000. Certainly, in most organisations we know, there would be many barriers to cross, much debate and a thorough authorisation process.

Who are you hiring?

It is also interesting to compare the recruitment process for entry level recruits. It is not untypical for graduates to navigate a five-stage recruitment process:

  • Online application form with competency questions
  • Numeracy, literacy and critical judgement tests
  • Record a sound or video file addressing a particular organisational or industry issue
  • Skype, avatar or telephone interview
  • Attend a full day assessment centre

Yet, for some of our most senior or business critical appointments, there is frequently little more than some polite interviews, followed by lunch with a couple of potential colleagues. Where the candidate is already known to the interviewer questions that may be perceived as intrusive are frequently avoided. Such questions include, “What is your salary?” “How is your commission/bonus calculated?” “Did you hit your targets?”  “Why are you leaving?” “What are the gaps in your knowledge/experience/ skills?” “Why did you leave your last job?” “What do you do all day?” Skills testing can be considered demeaning, so doesn’t take place. “Of course, she knows her stuff: she’s been qualified for xx years. I can’t ask her about that ….” This avoidance denies both parties the opportunity to identify mismatches and avoid unsuitable appointments and the resulting fall out.

Practical steps

While recruitment and interviewing, in particular, has its limitations there are simple and practical steps that can be followed to improve our success rate and create a positive candidate experience, whatever the outcome:

  • Clarity about the role – accurate, up to date job description and meaningful person specification
  • Consistent and replicable process for all candidates
  • Use of a structured interview framework to ensure you elicit the information you need to make a rational, objective and unbiased decision
  • Use of intelligent, relevant, challenging questions
  • Listen – really listen
  • More than one interviewer (not necessarily at the same time, but in the process)
  • Skills testing if appropriate
  • Candour about the role, clarity about the process, promises kept about deadlines, feedback given if requested
  • The offer of a “peer-to-peer” coffee meeting to enable the candidate to find out about culture, flexible working, support for learning, career opportunities, expectations of hours worked
  • Removal of artificial “pressure” environments such as arriving late for meetings, putting them in a room where the ‘phone rings, “good cop, bad cop” interviewers. If you want to see how they work under pressure, set up a case study with tight timelines and meaningful tasks
  • Be ready for the new hire when he or she arrives – plan the induction and onboarding process to help hit the ground running
  • Set clear objectives and outcomes and build in time to review progress against them at the end of the first day, week month, three months
  • Give honest, candid, regular feedback and provide training and support if required.

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