The Unexpectedly High Cost of a Bad Hire(linkedin.com)
linkedin.com
The Unexpectedly High Cost of a Bad Hire
http://www.linkedin.com/today/post/article/20130716151946-2967511-the-high-costs-of-a-bad-hire-and-how-to-avoid-them
15 comments
This has been my experience - one unethical employee ran off with our best customer that represented about 40% of the business.
I now value ethics above all else in working relationships. Two ways I perhaps can quickly determine ethics: Watch how they interact with people in low status positions (food servers, gas attendants) versus how they interact with you. Also ask them about how they determine morality - if they give you a blank stare then perhaps take that into consideration.
I now value ethics above all else in working relationships. Two ways I perhaps can quickly determine ethics: Watch how they interact with people in low status positions (food servers, gas attendants) versus how they interact with you. Also ask them about how they determine morality - if they give you a blank stare then perhaps take that into consideration.
Just a note: If you value morality and ethics so dearly then make sure that the company is aligned with these expectations. All too often a company looks for moral employees while it will screw them over when it is convenient. Because hey, it's business right?
It can be worse... Companies can hire moral workers because they won't steal secrets after they've been screwed over. But such is life. If morality were 100% cost-effective then it wouldn't really be morality, it would be business.
I think this dramatically understates the cost. What's the cost when 3 people quit because you hired a PM that threw them under the bus in front of a client? What's the cost when 2 women quit because they were sexually harassed? What's the cost when an employee defrauds a client?
When did someone who runs off co-workers or gets the company in legal trouble become the "average" bad hire? In fact, when did this become a common occurrence for recently-hired people? Everyone I know of in 11 years or professional experience who fits this category were long-time employees of the company before these issues arose.
When did someone who runs off co-workers or gets the company in legal trouble become the "average" bad hire? In fact, when did this become a common occurrence for recently-hired people? Everyone I know of in 11 years or professional experience who fits this category were long-time employees of the company before these issues arose.
The truly bad sometimes find ways of covering their tracks. I've seen bad newbies, and bad oldies.
Even the "average" bad hire costs a lot more than what the article suggests. $15K for a $50K job seems very low. What's the value of the "average" bad hire turning a client reference into an angry client? Or having them hire someone very bad for one of their positions? Or undermining company morale?
Even the "average" bad hire costs a lot more than what the article suggests. $15K for a $50K job seems very low. What's the value of the "average" bad hire turning a client reference into an angry client? Or having them hire someone very bad for one of their positions? Or undermining company morale?
What is the probability of an "average" bad hire doing those things? That was at the core of my original point. This seems to come up on HN every time a hiring discussion moves into talking about "bad" hires. People bring up realistic negative possibilities without attaching a probability to them, making it impossible to determine a ballpark expected value, or in this case cost, of the action. Now, for various reasons calculating an accurate probability is virtually impossible as well, but one should be able to come up with a rough idea of what it is. Additionally, every company should have some sort of controls in place to minimize the damage a new hire could do, even if the action is a genuine mistake or intentionally malicious.
Good question. Some of it is quibbling on words. My general take on people's ability is it's a fat tailed distribution on both sides.
There's a middle that is fairly tight in ability, and they perform good or bad largely dependent on the circumstances system (including management) that they're put in. The upside and downside surprises can go very far on both sides of the mean. Which means slightly bad hires tend to be products of a bad system, which is what should be fixed. But very bad hires can do an inordinate amount of damage even relative to their small probability. P(x) * Value(x) comes out to a very large negative #. (Similarly P(x) * Value(x) comes out to a very high absolute # for the great hires)
Now what's the probability of a truly awful hire? Depends on how well you hire. I suspect it's somewhere between 1% and 10% based on the organization. Same on the upside.
There's a middle that is fairly tight in ability, and they perform good or bad largely dependent on the circumstances system (including management) that they're put in. The upside and downside surprises can go very far on both sides of the mean. Which means slightly bad hires tend to be products of a bad system, which is what should be fixed. But very bad hires can do an inordinate amount of damage even relative to their small probability. P(x) * Value(x) comes out to a very large negative #. (Similarly P(x) * Value(x) comes out to a very high absolute # for the great hires)
Now what's the probability of a truly awful hire? Depends on how well you hire. I suspect it's somewhere between 1% and 10% based on the organization. Same on the upside.
I totally agree that this dramatically underestimates the cost of a bad hire. It's more accurate for a hire not hitting expected performance, but in my experience a bad hire has a much more extreme worst case. This is especially true in programming because the effect of an individual's decisions gets amplified by large numbers in many cases (the number of internal and external customers downstream of these decisions).
sorry the last sentence seems to be a non-sequitur. Why does the high cost of a hiring mistake justify letting slightly sub-par people stay?
Because they might be replaced with someone who is much, much worse. Not awesome vs. complete disaster.
Presumably because of the risk of replacing a known slightly sub-par quantity with an unknown truly bad hire.
Very risk-averse people might prefer a known meh to an unknown potential apocalypse.
You answered it much better than me. Every hire that comes in without someone at the firm personally vouching for their character is a risk. Sometimes an honest meh is better than risking the apocalypse.
Known quantity versus unknown.
The author starts off with some data, but it's far from complete. $15k in lost productivity for a 50k hire? Sure, then there's the retraining costs, potential hits to morale, and then the opportunity cost. Opportunity cost for a bad hire varies, but the profit you could enjoy from a motivated person can be huge depending on their role.
Now then, we get into solutions and suddenly things start getting fluffy. "... find an expert in the candidate’s specific field and get some advice on the best questions to ask." Fluff. This is opinion piggybacking on fact.
There's a huge body of research that could tell you how to hire better people. If you've read any of it, you'll know that unstructured interviews are not the way to go! You're essentially testing a person's ability to perform in an interview rather than their ability to do the job.
I'm continually shocked that businesses who rely on their employees for every penny of revenue have no idea how to hire the best employees. Everyone thinks they have some sort of sixth sense gut feeling that can guide them to the right people. Some of the research in this field is very good, and it could be better if business owners and managers paid it any mind.
Now then, we get into solutions and suddenly things start getting fluffy. "... find an expert in the candidate’s specific field and get some advice on the best questions to ask." Fluff. This is opinion piggybacking on fact.
There's a huge body of research that could tell you how to hire better people. If you've read any of it, you'll know that unstructured interviews are not the way to go! You're essentially testing a person's ability to perform in an interview rather than their ability to do the job.
I'm continually shocked that businesses who rely on their employees for every penny of revenue have no idea how to hire the best employees. Everyone thinks they have some sort of sixth sense gut feeling that can guide them to the right people. Some of the research in this field is very good, and it could be better if business owners and managers paid it any mind.
Do you have any links handy to some of this research? I'd be interested to check it out.
I'm not joking when I say there's a body of research. You can find a lot of it in journals that deal with organizational behavior, strategic management, and strategic HR.
I mentioned specifically the oft-used unstructured interview. Here are some links for that point:
>Meta-analysis: " structured interviews produced mean validity coefficients twice as high as unstructured interviews" http://onlinelibrary.wiley.com/doi/10.1111/j.2044-8325.1988....
>Meta-analysis: All interview validity estimated at .19, but structured interviews estimated at .39: http://onlinelibrary.wiley.com/doi/10.1111/j.2044-8325.1989....
Outside of boring journals and texts that you might not have access to, we can always just Google Scholar for things like "employment selection instrument": http://scholar.google.com/scholar?q=employment+selection+ins...
I mentioned specifically the oft-used unstructured interview. Here are some links for that point:
>Meta-analysis: " structured interviews produced mean validity coefficients twice as high as unstructured interviews" http://onlinelibrary.wiley.com/doi/10.1111/j.2044-8325.1988....
>Meta-analysis: All interview validity estimated at .19, but structured interviews estimated at .39: http://onlinelibrary.wiley.com/doi/10.1111/j.2044-8325.1989....
Outside of boring journals and texts that you might not have access to, we can always just Google Scholar for things like "employment selection instrument": http://scholar.google.com/scholar?q=employment+selection+ins...
If you're looking for practical info about implementing better interviewing practices, check out this book: http://www.amazon.com/Hiring-Geeks-That-Fit-ebook/dp/B00AUYN...
Highly recommended. Covers some subsets of structured interviewing as well as effective techniques for the rest of the hiring process.
Highly recommended. Covers some subsets of structured interviewing as well as effective techniques for the rest of the hiring process.
The problem with these 'how to hire' articles is that they're not based on empirical evidence. Therefore they might be just as wrong as Google's interview puzzles (which were found to be worthless).
>So if you’re hiring for an IT role, find and talk to an IT person about what makes a good team member.
Not sure why that's relevant. People can be good team members without really thinking about what makes a good team member (and vice versa).
>Savvy HR departments are already looking through candidates’ Facebook and LinkedIn profiles. I recommend going as far as checking a candidate’s Twitter feed to gain insight.
That's illegal in most of Europe. It's pretty dangerous to check somebody's personal social media feeds. The interviewer will probably be affected by the candidates politicial or ideological positions (possibly subconsciously).
>People tend to be the most alert and thoughtful during this initial stage of the job application process.
And some people submit a lot of job applications and don't have time to pay perfect attention during that process (even if they are alert and thoughtful on the job).
>So if you’re hiring for an IT role, find and talk to an IT person about what makes a good team member.
Not sure why that's relevant. People can be good team members without really thinking about what makes a good team member (and vice versa).
>Savvy HR departments are already looking through candidates’ Facebook and LinkedIn profiles. I recommend going as far as checking a candidate’s Twitter feed to gain insight.
That's illegal in most of Europe. It's pretty dangerous to check somebody's personal social media feeds. The interviewer will probably be affected by the candidates politicial or ideological positions (possibly subconsciously).
>People tend to be the most alert and thoughtful during this initial stage of the job application process.
And some people submit a lot of job applications and don't have time to pay perfect attention during that process (even if they are alert and thoughtful on the job).
Does a bad hire explicitly mean those who engage in office politics, lower the morale, engage in fraud, malice, etc.
Or
Does it mean an entry level dev/intern who is just learning the ropes and might commit a few mistakes out of genuine incompetence/inexperience rather than malice.
I see most hiring managers, HRs and what have you intimidate potential entry-level interviewees that if they weren't upto and in some cases over the company standard they'd end up costing the company a lot.
Or
Does it mean an entry level dev/intern who is just learning the ropes and might commit a few mistakes out of genuine incompetence/inexperience rather than malice.
I see most hiring managers, HRs and what have you intimidate potential entry-level interviewees that if they weren't upto and in some cases over the company standard they'd end up costing the company a lot.
The first one is just bad, but sadly common.
The "entry level dev/intern" really depends on a lot of factors. If it is truly and entry level position, then you should expect mistakes to be committed and you should be paying them less and have some infrastructure to handle the mistakes and training. If they learn, they get more pay. If they cannot learn, then they get canned. You're taking a chance when you advertise that position and should price the job accordingly.
The "entry level dev/intern" really depends on a lot of factors. If it is truly and entry level position, then you should expect mistakes to be committed and you should be paying them less and have some infrastructure to handle the mistakes and training. If they learn, they get more pay. If they cannot learn, then they get canned. You're taking a chance when you advertise that position and should price the job accordingly.
I take it to mean both. They're both bad hires, though obviously in different ways and degrees.
Generally speaking though, in places I've worked, simply being not up to snuff is not in and of itself evidence of a bad hire.
If you're not competent, cannot learn quickly, or are unwilling to train and learn, then you may be a bad hire.
Generally speaking though, in places I've worked, simply being not up to snuff is not in and of itself evidence of a bad hire.
If you're not competent, cannot learn quickly, or are unwilling to train and learn, then you may be a bad hire.
I can understand if they cannot learn quickly but I haven't come across or ever heard of hires unwilling to train. Why would entry-level employees be unwilling to train?
He quoted the tweet as is, which led me to the identity of the poor job seeker who had the misfortune of applying to work at this company. Looks like bad form to me.
I'm curious what about the tweet thing turned this guy off.
I'm curious what about the tweet thing turned this guy off.
Yup, it shows... let's see going through this thread... it shows that the company had piss poor judgment, doesn't take hiring seriously, aren't prepared to hire the best people, ...
So how I read this is he stalks applicants on Facebook, won't hire people who drink socially during their own personal free time, and demands that applicants reveal the web sites they hang out on, or it's an instant no hire.
None of these things have anything to do with capability to do a job.
Sure, bad hires can be costly, but this article's advice is terrible and the author comes across as a crazed tyrant.
None of these things have anything to do with capability to do a job.
Sure, bad hires can be costly, but this article's advice is terrible and the author comes across as a crazed tyrant.
And how I read it is that somebody who shows up drunk to a job interview does not use good decision making skills and is likely unreliable.
I love a beer in my time, and I would be happy to enjoy a beer with my coworkers in our time, but I find it hard to believe that somebody who shows up drunk to an interview (even a phone interview) is a "good hire".
I love a beer in my time, and I would be happy to enjoy a beer with my coworkers in our time, but I find it hard to believe that somebody who shows up drunk to an interview (even a phone interview) is a "good hire".
> We found it and needless to say, he was not hired.
I guess it's good to know that Hootsuite considers consuming alcohol during non-working hours - while attending a conference intended to improve one's social media skills - to be a firing offense. They should probably include that in their job ads to make sure "bad" candidates don't apply.
I guess it's good to know that Hootsuite considers consuming alcohol during non-working hours - while attending a conference intended to improve one's social media skills - to be a firing offense. They should probably include that in their job ads to make sure "bad" candidates don't apply.
They didn't fire him. They just didn't hire him. Tweeting that you're drunk going into the interview says a few things: you don't take it seriously, you aren't preparing as best you could, and possibly that you're driving drunk to get to the interview.
While I agree with you, the article mentioned it was a phone interview, so hopefully he wouldn't be driving drunk. I suppose he could be driving drunk while talking on the phone, which would explain some of the people I see on my morning commute.
I would have seen how the guy did on the interview.
It stops being "during non-working hours" if you're drunk when you roll into the office. I personally don't care what you drink and how much, but you should not be intoxicated when you walk through the door.
The tweet wasn't "I got so drunk last night, yo!" it's "I'm going into this thing drunk".
The tweet wasn't "I got so drunk last night, yo!" it's "I'm going into this thing drunk".
I think getting drunk prior to going for an interview is an obvious no-hire. It shows piss poor judgement.
On the other hand, if you're looking to work at an employer that doesn't mind how much alcohol is in your bloodstream while at the office, it might be a good way to filter out places you don't want to work at.
On the other hand, if you're looking to work at an employer that doesn't mind how much alcohol is in your bloodstream while at the office, it might be a good way to filter out places you don't want to work at.
What if the person in fact has amazing judgment and there were circumstances you weren't aware of and that e.g. there was good reason for him to get drunk at that conference (networking, other opportunities, etc.)? Would you be ready to admit your deductive reasoning ability is seriously flawed?
Under what possible circumstances could it be a good reason to get drunk before a phone interview?
Either don't schedule a phone interview after an event where you will be drinking, or don't drink at the event. That doesn't seem so hard.
Either don't schedule a phone interview after an event where you will be drinking, or don't drink at the event. That doesn't seem so hard.
I love how everything is so black and white with some people. If he performed just fine on the phone interview, why should you give a flying fuck? No really, please answer that. And it doesn't show "poor judgement" if there were no adverse consequences.
>Either don't schedule a phone interview
Perhaps he didn't have the option.
>or don't drink at the event.
As others have said, networking opportunities may have presented themselves. Who are you to judge his situation with absolutely no information? Judge him on how well he conducted the phone interview. That's all that matters at this stage.
What I see are people who are obsessed with irrelevant information when it comes to hiring. Its modern-day tea-leave-reading and it has no place in what should be a rational business decision.
>Either don't schedule a phone interview
Perhaps he didn't have the option.
>or don't drink at the event.
As others have said, networking opportunities may have presented themselves. Who are you to judge his situation with absolutely no information? Judge him on how well he conducted the phone interview. That's all that matters at this stage.
What I see are people who are obsessed with irrelevant information when it comes to hiring. Its modern-day tea-leave-reading and it has no place in what should be a rational business decision.
I've seen a lot of people say they get nervous and freeze up in an interview, performing far less well than they do on a job. Perhaps for some people this also applies to phone interviews, and perhaps a moderate amount of alcohol might help them avoid freezing up.
To some extent I'm playing devil's advocate, but you did ask for possible circumstances. I suppose in the employer's shoes I'd pretend I hadn't read the Twitter post and go ahead and carry out the interview. If he aces it, great. If he muffs it, I wouldn't make allowances for him being drunk, because he would have demonstrated showing up drunk was lousy judgment on his part.
To some extent I'm playing devil's advocate, but you did ask for possible circumstances. I suppose in the employer's shoes I'd pretend I hadn't read the Twitter post and go ahead and carry out the interview. If he aces it, great. If he muffs it, I wouldn't make allowances for him being drunk, because he would have demonstrated showing up drunk was lousy judgment on his part.
Interesting social phenomenon: nicotine and caffeine are allowed drugs on the job, but alcohol is not.
I'm sure if you consumed enough nicotine/caffeine on the job to seriously impair your judgement, it'd cause you HR problems.
I've seen a number of people over the years who would take smoke breaks nearly every hour of the day. That doesn't necessarily impair judgment, but it may have an impact on performance. In theory this is something on which you can crackdown, but it doesn't always happen.
Actually it significantly boosts my performance, which is why I do it the first place. (Obviously if you were hiring e.g. a surgeon, whose job requires several hours entirely without interruption, that would be a different story, but few IT jobs have that requirement.)
But nobody said "enough alcohol to seriously impair your judgement," rather we were talking about any alcohol at all.
That's not what I understood. steverb said, "an employer that doesn't mind how much alcohol is in your bloodstream"
i've worked at and seen plenty of places where they drink beer at work. usually it starts around 3 or 4 though, not in the morning. this is both california and the east coast.
The ability to work well with others is a skill that benefits any workplace. An obvious way to gauge this is to contact the candidate’s references. But, why not take it a step further and dig into a candidate’s social media profiles?
Ehh. I like to keep my personal life separate from my professional life. The way I conduct myself with friends is not how I interact with coworkers.
An employer who insists Facebook and Twitter are among the best indicators of compatibility around the office should probably review how well they actually work with others.
Ehh. I like to keep my personal life separate from my professional life. The way I conduct myself with friends is not how I interact with coworkers.
An employer who insists Facebook and Twitter are among the best indicators of compatibility around the office should probably review how well they actually work with others.
Feels like an oversimplification. One issue is your work output. An independent issue is the team-building and motivating (or demotivating) effect you have on your co-workers. Tough to find someone who is a "A+ player" on both dimensions, while also affordable, honest, loyal, etc. Everyone has some limitation.
This article seems to promote risk aversion (and HR consulting services) without providing usable insight.
This article seems to promote risk aversion (and HR consulting services) without providing usable insight.
I found this article extremely helpful. I now know the CEO of Zappos thinks he can snoop into my personal life, because hey, it can cost him some money if he doesn't. What is my privacy in the face of that?
If I remember the book correctly, Tony Hsieh credits his success to insights gained from going to raves and doing drugs. (Ecstasy, I assume.) So he's probably not looking for Puritans.
"3. The curveball: Hide an unexpected question in the fine print." So in addition to putting you through pointless interview puzzles they also want to send me on a scavenger hunt?
I love the secretary test! Our CEO at Lucidchart used to sit right at the front door (best natural light) and it was always funny to watch how potential hires would interact with him. The smart ones recognize his face and immediately engage, and others don't say anything on the way in or out. Who doesn't visit the website of their potential employer and at least read up about the management team? Especially when at the time it was a startup of 10 people!
Are you saying you don't hire people because they didn't instantly recognize your CEO? Honestly I could look up the company, see some standard headshots, but I'm not sure I would instantly recognize them in person. Sounds like someone has a "I'm so important everyone should know me" complex.
You might miss out on some terrific applicants who also happen to be face-blind. (Or just blind.)
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In my opinion, for product based companies, it is a small subset of brilliant employees which bring the most value to the company.
Although the goal is to maximize such hires, due to the broken(both ways) nature of the hiring process, the company ends up hiring many employees who turn out to be average, and some even go on to become the subject of this article- mediocre.
More importantly, following this line of thinking, the cost incurred due to a manager causing the top talents to leave the company is much more(esp. compounded cost), than the cost of hiring a bad employee.
Although the goal is to maximize such hires, due to the broken(both ways) nature of the hiring process, the company ends up hiring many employees who turn out to be average, and some even go on to become the subject of this article- mediocre.
More importantly, following this line of thinking, the cost incurred due to a manager causing the top talents to leave the company is much more(esp. compounded cost), than the cost of hiring a bad employee.
"How costly? The U.S. Department of Labor currently estimates that the average cost of a bad hiring decision can equal 30% of the individual’s first-year potential earnings. That means a single bad hire with an annual income of $50,000 can equal a potential $15,000 loss for the employer."
"How do you find your “cream of the cream”? What are your unique or tried-and-tested hiring strategies?"
Am I the only one who was thinking "How do you expect to hire the “cream of the cream” if you only pay $50K a year?"
"How do you find your “cream of the cream”? What are your unique or tried-and-tested hiring strategies?"
Am I the only one who was thinking "How do you expect to hire the “cream of the cream” if you only pay $50K a year?"
I think this dramatically understates the cost. What's the cost when 3 people quit because you hired a PM that threw them under the bus in front of a client? What's the cost when 2 women quit because they were sexually harassed? What's the cost when an employee defrauds a client?
The cost of a hiring mistake is not a fraction of a years compensation, it's many multiples of a years compensation. This is one reason many places let slightly sub-par people stay.