The Costs of a Bad Hire

In a recent article in the Denver Business Journal it was noted that hiring the wrong employee can be very expensive, and yet no company seems to be immune from having done so. And will do so again. The cost, according to a CareerBuilder survey is $14,000 per bad hire. In the government contracting arena where I have traditionally worked, there seems to be a consistent pattern of hiring the wrong contract manager SEVEN TIMES before the right one is found. Even assuming the survey numbers to be accurate, that’s almost $100,000 thrown down the drain.

The article was less than clear as to which costs were included. For any business there is the task of defining the job requirements and responsibilities. This can be intensely time consuming, especially if there are a number of approval layers. The time of the HR folks can be considerable, and then there is the cost of posting or otherwise advertising the opportunity. Then follows the winnowing of the resumes, the interview process, which seems to get even more convoluted over time (and size of the organization) wasting both the candidates’ and the interviewers’ time. Then follows the hiring process, the on-boarding, and the six months to one year of non-productive time as the new hire acclimates to the culture of the new organization (an aspect of most organizations that is actively hidden from candidates during the interview process). Whatever training must be conducted adds to the onboarding cost, and even if the candidate shows up “fully qualified,” there are always unique requirements of the organization of which the new hire must be made aware. Day one is always a busy day of filling out paperwork if even only for benefits and emergency contacts. (Am I the only one who, when asked who to contact in case of emergency writes in “911”?) Again appealing to my government contracting world, there are a great number of “special” training requirements from the protection of sensitive or classified information, to the unique clauses found in all government contracts, to managing government property, to the increased ethics responsibilities. And if a security clearance is required, that will add another year of unproductive time to the tab. The $14,000 figure suddenly seems totally inadequate.

Whatever the number, there are always additional hidden costs. Disruption to the power hierarchy that exists in all organizations, turf wars over responsibilities, as well as what I call “negative turf wars” (jobs for which no one wants responsibility) that often lead to dumping it all on the “new guy or gal” and totally outside of the advertised job responsibilities. The same survey said that the wrong hire can cause the loss of good employees at a cost of $29,000 each (also not further explained).

So if hiring the wrong employee costs so much and might also cost the loss of a good employee, why are we so bad about it? My answer is simple. Leadership. An interview, a resume, or an essay is not really going to tell you much about a person. A detailed background check might be a little more revealing, and a quick check across social media might also be somewhat illuminating, but each of those adds time and cost to the hiring process. How is leadership the answer? I’m glad you asked.

The culture of the organization is set by the leaders within it – not just those in leadership positions, but the genuine leaders who set visions, goals, and action plans. Leaders are measured by results and judged by their actions. Hiring processes tend to be entrenched and done a particular way because “we’ve always done it this way.” I consider these the 6 most expensive words in business and government today. It takes leadership to break that paradigm. It takes leadership to identify other leaders. It takes leadership to mentor the team and create an environment that allows for different practices to take root.

It has been said that management will decide who the bosses are, but the employees will decide who the leaders are. The incumbent management must make the hiring decisions and for probably many reasons, one of which most assuredly is a fear of losing power, people tend to hire those most similar to themselves. While this might reflect race and gender preferences, it clearly includes people that are no better a leader than the hiring authority since hiring more qualified people will threaten the entrenched hierarchy. Over time, this results in a “dumbing down” of the leadership abilities of the folks on the team. And without a strong push to constantly increase the leadership abilities of the team, the less qualified and those less able to find another position will accumulate.

Leadership creates a vision around which the team can coalesce. Leadership raises the bar. Leadership provides an example and mentors the team. And rather than making hiring decisions based on a stream of paper, or a series of “putting your best foot forward” interviews, leaders will require the entire team to raise its leadership abilities. And leadership does not just magically appear. It takes a lot of hard work and dedication. Too many mangers take the path of least resistance and do not demand the best from the team, or set a vision for the team, or gather the resources necessary for the team to perform its assigned tasks. They cling bitterly to their current position and the power, however weak it might be, that comes with the position. Positional power is the weakest form of power. A leader who draws a following – one who people WANT to follow – develops genuine power and can sustain their position as a leader. This is the strongest and perhaps only legitimate form of power. And that is the power it takes to stop making bad hires.

Putting a non-leader into a leadership role does not make that person a leader. Any organization headed by a non-leader will not thrive and possibly not even survive. So make sure that only leaders are placed in leadership positions, and the rest of the hiring process will take care of itself. And the money saved by not making bad hires, or driving good people away, can be put to much better use. It’s called sustained leadership.