
The Unexpectedly High Cost of a Bad Hire - taylorbuley
http://www.linkedin.com/today/post/article/20130716151946-2967511-the-high-costs-of-a-bad-hire-and-how-to-avoid-them
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mathattack
"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."

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.

~~~
r_m_adler
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?

~~~
GeneralMayhem
Very risk-averse people might prefer a known meh to an unknown potential
apocalypse.

~~~
mathattack
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.

------
ignostic
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.

~~~
dsjoerg
Do you have any links handy to some of this research? I'd be interested to
check it out.

~~~
ignostic
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....](http://onlinelibrary.wiley.com/doi/10.1111/j.2044-8325.1988.tb00467.x/abstract)

>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....](http://onlinelibrary.wiley.com/doi/10.1111/j.2044-8325.1989.tb00491.x/abstract)

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...](http://scholar.google.com/scholar?q=employment+selection+instrument)

~~~
joshyeager
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...](http://www.amazon.com/Hiring-Geeks-That-Fit-
ebook/dp/B00AUYNM38)

Highly recommended. Covers some subsets of structured interviewing as well as
effective techniques for the rest of the hiring process.

------
nawitus
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).

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ameen
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.

~~~
potatolicious
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.

~~~
ameen
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?

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taway2012
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.

~~~
vehementi
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, ...

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droithomme
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.

~~~
ethomson
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".

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jellicle
> 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.

~~~
LanceH
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.

~~~
ntumlin
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.

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quacker
_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.

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auctiontheory
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.

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RogerL
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?

~~~
auctiontheory
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.

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johnward
"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?

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mitchdumke
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!

~~~
johnward
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.

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sahrizv
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.

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chrisbennet
"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?"

