During a recent assignment a candidate favoured early in the selection process turned out to be unsuitable. Whilst not a revelation (a recruitment process is supposed to weed out bad hires), what is noteworthy is that we improved the process for this particular position to include additional data points than used previously.
We assigned contenders a specific task, asked them to provide feedback on the task (as if they were an internal employee), as well as doing the usual interviews, psychometric testing, references and medical. Constant communication with the hiring manager, HR and myself ensured information flow for feedback and analysis. By using multiple data points and objective reasoning an informed hiring decision was made and the appointee is performing brilliantly in the role.
Excellent hiring processes pay off, bad hires are costly
Anecdotally and looking at hard evidence minimising the number of bad hires your company makes is worth it.
The Harvard Business Review (HBR) argues: “HR understands that structured interviews help identify the best candidates. Yet many organizations allow managers with no training in interviewing to go with their gut in asking questions and deciding whom to hire—which increases the risk of litigation as well as the cost of poor hires.”
Here’s more proof:
- Companies adept at recruiting “experience up to 3.5 times the revenue growth and as much as 2.1 times the profit margins of less capable companies” according to a Boston Consulting Group study.
- The cost of a bad hire can be tens of thousands to hundred’s of thousands of dollars.
- Top performers are 4x more valuable than average performers.
- Worrying about talent is what keeps CEO‘s awake at night.
- Think back to a time in your career when the wrong person was appointed into a role and it wreaked havoc in your workplace. The negative impact of an ill suited hire can have a ripple effect beyond the immediate team.
Many data points beats instinct
The risks are evident, however finding ways to reduce the number of bad hires isn’t easy.
The HBR magazine published an interesting article titled “In Hiring Algorithms Beat Instinct”, which prompted me to write this blog post.
HBR says use of a “purely algorithmic system, based on a large number of data points, to narrow the field before calling on human judgement to pick from just a few finalists”.
Research shows hiring managers can be easily distracted by things that might be only marginally relevant (such as applicants compliments or remarks on arbitrary topics), and we humans use information inconsistently.
HBR recommends a combination of an algorithmic rating system + the hiring manager’s hard-earned wisdom to lessen recruiting errors.
McKinsey – the toughest of them all
McKinsey famously has the pickiest hiring process in the world. Grueling but effective, prospective employees have up to 20 interviews before receiving an offer. Their philosophy is employee for life therefore once you are McKinsey you never leave (think law abiding mob). They select “the best”, intensely develop new hires and keep their own close even after they flee the flock. Business growth is maintained through alums who often become future clients which surely justifies the high cost per hire in the long run.
Interview a candidate more than once
A minimum of four (4) interviews (any more isn’t useful) is what Google recommends. Laslo Bock, VP People Operations at Google say’s they don’t compromise their high hiring bar which means they have to “kiss a lot of frogs before they find a prince or princess”. Amazon is also well known for their internal ‘bar raiser’ interview training program.
Capability and learning agility is preferred over high GPA or coding expertise these days at Google. Objective information gathering, a goog-ly rating system and assigning the hiring manager only one vote among many is how they keep it algorithmic. Here is a short video where Bock explains Google’s philosophy:
Don’t be afraid to find the warts
When I met with a respected executive search industry leader for a coffee recently he kindly allowed questions on his craft. Not only did I learn that he actively seeks out a bad reference on a prospective candidate, he expects one. This search veteran isn’t afraid to find out those he is wooing on behalf of his clients may have a few warts – but a blemish or two doesn’t mean they’re undesirable, depending on severity and context. A rounded view of a person undoubtedly lowers the chances of his client hiring a frog.
Acknowledge the pressure to hire
Algorithmic systems, engaged hiring teams, objective processes, bucket loads of interested candidates – sounds like recruiting nirvana to me! However most companies who don’t have blockbuster employment brands, won’t pay large retainers, or don’t have the resources available to conduct 20 interviews tend to have a more pragmatic view of hiring. Market realities and a tight economy weigh in.
Who can afford even four interviews per candidate? An overly time and resource intensive recruitment process isn’t doable except for the elite. Or is it the only way to become elite?
Market conditions affect hiring outcomes
In boom times when money is flowing but talent is in short supply companies don’t like making candidates jump through hoops since the bigger threat is losing a rockstar to a competitor. Nor is the applicant pool large enough for some skills sets which is why proactive sourcing is critical.
Nevertheless looking back at two previous resources industry cycles it’s become clear hiring mistakes were made (including by me), and valuable lessons hard learned. The pressure was so strong that the need to make a detached decision was outweighed by the force to fill a role fast. In retrospect would it have been better to tighten the hiring process possibly sacrificing speed? Always a tough one to answer.
When presenting at the Australasian Oil and Gas Conference (AOG) in 2014 I mentioned the pressure to hire for critical roles was bearing down on the oil and gas industry in Australia due to skills shortages, particularly in liquefied natural gas (LNG). This lack of available talent was a short term operational issue in the Australian oil and gas sector, a word of caution for O&G companies to maintain vigilant hiring processes despite market conditions.
Can agency recruiters be objective?
Don’t rely on contingent recruiters from agencies to be objective about their candidates since they have KPI’s and sales targets linked to income. High self-interest rarely allows unbiased advice, a point I make in both my books. ‘Fee for success’ recruiters earn the most in boom times when hiring processes are shortcut and quick placements can be made. Instead companies should engage professional recruiters who work on a retainer and are not selling candidates to get paid.
Hire for potential as well as past performance
Better hiring isn’t just about rigorous procedures though. Spotting “potential” can focus long winded recruitment exercises according to Claudio Fernandez-Araoz, a global search consultant and writer. Claudio says there are two risks in hiring – hiring the wrong person or missing out on hiring an exceptional candidate due to unconscious bias and incorrect snap decisions.
In addition to finding intelligent values-driven people with leadership ability, companies should be looking for qualities such as curiosity, insight, engagement and determination (along with competencies, experience and qualifications) since potential is a better predictor of success in a role.
Strike a balance between being informed and making a timely hiring decision
Hiring the right people at the right time in the right way is inherently complex. In my opinion companies can strike a balance between knowing enough about a candidate to make an informed hiring decision whilst managing cost, speed and quality.
Set high standards, gather enough data points, gain multiple opinions on candidates from participants skilled in interviewing, be objective, do due diligence and let reasoned judgment contribute to the outcome. Based on what we know today this is the best way to reduce your risk of a bad hire.
About the Author
I’m a corporate recruiter with more than 10 years of experience helping organisations hire talent at all levels. I’ve coached managers on how to conduct effective and legally compliant recruitment processes. For information about interview and recruitment skills training contact me directly.