How to avoid the cost of a bad hire
Part of the ASPIRE Talent Management series
As outlined in our previous article, ACQUISITION is the first of the four key elements which can form the basis your talent management strategy. Those 4 key elements are encapsulated in the acronym ASPIRE. (A: Acquisition. SP: Succession Planning, I: Improvement and RE: Retention and Engagement)
“Talent acquisition: the ongoing process of attracting, recruiting, inducting and making use of the right talent in alignment with your business objectives and goals”
The cost of a bad hire is up to 350%!
Firstly, what do we mean by a ‘bad hire’? We would class this as an employee – and for the purposes of this article specifically at the leader or manager level – that was to leave, or be asked to leave the organisation, within the first 12 months following their recruitment. This is a nightmare situation for any business, and one to be avoided
There are many statistics out there now telling us that the cost of a bad hire can be up to 350% of the annual salary of a candidate. You may have seen this infographic from The Recruitment & Employment Confederation before; it gives a great visual summary of the cost of poor hiring decisions.
Up to 350% sounds unbelievable, but when you really look at it, it’s actually very realistic. First of all, there’s the direct element to consider; how much does it cost to pay that individuals salary? Let’s say your hire is going to take home a 50k salary, and say they leave after nine months – there’s nine months salary straight away you’ve lost, you never get that back.
In addition, you’ve paid a recruiting fee to bring them on board. You’ve trained and inducted them into your business, and given them some ongoing development during the time they’ve been with you. That’s all direct cost to your business.
But what about those indirect expenses as well? A loss in productivity of that individual compared to the previous incumbents. A loss in productivity of the team they’ve come into due to the disruption. There’s also a potential risk of loss to your organisation’s reputation, depending on the responsibilities of the role. So when you add it all up, 350% of the salary could even seem conservative in some cases!
Horns and Halo
Avoid that unconscious bias
There is a well-known phrase in the recruiting business: the ‘horns and halo’ effect. You know when you meet somebody whether you like them or you don’t, it’s an instant gut reaction, an unconscious bias that can often be felt by the panel members in an interview setting. One interviewer may take an instant shine to the candidate, whereas the others may get the opposite feeling. We tend to like people who are like ourselves and a number of factors can hinder an objective assessment, such as gender, interests, age, even whether you’re from a similar background – all this can form a personal bias. One of the things that we recommend to avoid the chances of a bad hire is to keep that unconscious bias, or horns and halo effect, out of this process for as long as you can.
An expensive, time-consuming and subjective task
Talent acquisition can be seen as an expensive, time consuming and somewhat subjective task, all of which may create the temptation to fast track the recruitment process. However, to avoid the potential of a bad hire, you want to make sure you get the right fit for your organisation. So it’s advisable to take the time to get it right at the front end, and advisable to take that subjectivity out.
IQ vs EQ
Eligibility vs Suitability
When you’re looking at potential candidates there are two key things to think about; eligibility and suitability.
Eligibility is about people’s knowledge, skills and qualifications etc. And whilst the knowledge and skills are often fundamentally important for a candidate to be successful in a role – the level of which depends on the role – eligibility is not the only thing to consider.
Suitability is about behaviours, personalities, personal preferences, values, natural tendencies, intrinsic motivators, employee expectations etc, and as these are more subjective these can be more difficult to measure.
Eligibility is really about the IQ (intelligence quotient), and suitability is more about someone’s emotional intelligence – the EQ. In today’s workforce, EQ is becoming ever more important and it can often be your behaviours and attitude that will help you progress into a management or leadership role.
Of course a CV can include both eligibility and suitability factors, however, to assess this quickly and objectively it is recommended to use technology and sophisticated assessment tools to identify individuals IQ and EQ.
Use tech to keep the unconscious bias at bay
Considering all the many elements that we look for in our ideal candidates, and taking into account that we want to keep this unconscious bias out of the process for as long as possible, all the while needing to fill the position in good time to help achieve business objectives – this all seems like a pretty large ask, right?
The early stages of your recruitment process can help with this; the screening tools offered by job boards, LinkedIn, your recruitment team etc. Once you’ve completed the initial screening phase, this is where the more sophisticated analytics tools can come into play, which will be able to then provide you with a clearer picture of your pool of candidates so you can decide which of these you want to progress to the interview stage in order to have that more robust conversation to further explore their eligibility and suitability for the role.
Risk assess your hires
Talent risk map
Chances are, at some point in your work life so far, you will have come across a risk matrix, or risk map – most likely in a Health and Safety context, used to define the level of risk by considering the level of probability or likelihood against the potential for severity of an incident or consequence. These risk maps are great for providing a greater level of visibility, which can then be taken into account during decision making and planning stages.
We use the same principle of the risk map for talent acquisition. Here’s the one that we put together.
As you can see, we’ve used the eligibility and the suitability factors which we’ve outlined above; eligibility sits on the vertical axis and suitability is on the horizontal axis. This creates the 4 quadrants which, when you map a candidate again this matrix, will give you an indication of the strength of fit for the role and for your organisation.
In an ideal situation, you’re looking for the ‘strong fit’ candidate, the one that is going to look, feel, sound like a really good match for your organisation who measures highly for both eligibility and suitability.
You may have a candidate that scores highly for suitability factors, so the EQ and the behaviours are looking good, but their knowledge and skills might not be quite there. Again, it depends on the particular role you’re filling but it may be easier to train for knowledge and skills than for the required levels of emotional intelligence and the behavioural aspects so this candidate could be seen as a potential ‘managed risk’.
Conversely, if you’ve got a candidate with high eligibility, so the right knowledge, skills and qualifications are all in evidence, but they do not possess the behaviours and emotional intelligence to be able to successfully carry out the role in question, the potential is there for this person to be a ‘high maintenance’ hire requiring a great deal of management and therefore not suitable for your business.
The final quadrant would show a candidate with both low eligibility and low suitability – a ‘weak fit’ for your organisation, and hopefully you wouldn’t come across many of these by the interview stage as your screening processes should already have discounted them from the race.
Current and future fit
Not only is the risk map certainly a great tool to use to support the recruitment process for current talent fit for your organisation, it can also be very helpful in developing a pipeline of future talent already in your organisation as part of a succession plan, focusing on key and critical roles. We will be talking about succession planning – creating a talent ready pool of people – in future articles.
3 elements to consider to avoid the cost of a bad hire
So far we’ve looked at the cost of a bad hire, the ‘horns and halo effect’ – that unconscious bias which we want to avoid, the desired balance of eligibility and suitability factors and taken a look at a tool which could be used to help assess potential candidates for this.
In the final section of this exploration around the subject of talent acquisition, we’d like to leave you with 3 elements to be considered as part of a robust talent acquisition process:
1. Understand your why…
Understand your reasons for recruiting for a particular role. If you’re recruiting for a position which just needs to be filled quickly, for example to help the business through capacity or demand issues, or perhaps for positions in the lower levels of the business, then your screening process might be focused more around the knowledge and skills areas. If you’re looking at management and leadership positions, you’re looking to recruit ‘talent’, and need to consider how you’re going to attract that talent.
Understanding your ‘why’ will help you to design your talent acquisition process.
2. Keep the ‘horns and halo’ at bay for as long as possible
There is plenty of technology which can help with that, and a good screening process can help with that, so that you able to make a considered decision as to who to bring through to the interview phase. If you don’t have the technology to be able to measure this, at the very least look at the emotional intelligence of your candidates – there are lots of good tools out there which can measure for emotional intelligence. We have our tried and tested tools such as Harrison Assessments and there are plenty of others out there to choose from.
3. Make use of the golden window
The induction and on-boarding phase is a vital part of the acquisition process. The probationary period is the ideal time, even once the candidate has been recruited into the organisation, to make sure that that person is the right fit for the role and for your organisation. Using something like the 360 process can provide an opportunity to get some feedback from those around your new hire; their peers, their subordinates and their superiors. It’s a golden window to make that final decision if you have to; it’s easier, less disruptive to the rest of the team, and easier to mitigate some of that potential indirect damage to the business we explored earlier, to let somebody go during their probationary period than it is when they’re a fully-fledged employee.
Those are 3 key elements we would advise you consider when you’re looking to attract, recruit and induct talent into your business.
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Peak Performance Partnership Ltd (3P) is a Business Performance Consultancy specialising in Talent Management. ASPIRE by 3P is our talent management solution which supports the talent life cycle of Acquisition, Succession Planning, Improvement and Retention & Engagement.
Co-written by Lindsay McGhie, Trevor Norman and Michelle Manning