Even in today’s economy, staffing and retention continues to be a top concern for business executives. But what continues to amaze me is that most companies fail to recognize the actual cost of their poor hiring decisions. Hiring mistakes not only add to the cost of staffing and turnover, they also contribute to lower productivity, lost customers, lower morale among qualified workers, and bad business decisions. However, since these business costs are hard to measure, usually they are never calculated or attributed to poor employee selection.

There are 7 Common Hiring Mistakes that can potentially cost your organization thousands or possibly millions of dollars (See calculation below).

1.    The job responsibilities and job expectations are not clearly defined for the position. This is a common problem especially when business is growing at a rapid pace. Some companies can get into the mindset of needing a “warm body” as quickly as possible to help pick up the extra workload. In the long run, this type of hiring practice proves to be a costly endeavor when additional training, performance problems, unmet expectations and low employee morale start eating up company time and management resources.

2.    Skills and competencies needed by the organization have not been clearly identified. Companies are constantly changing, goals are shifting, and technology is always improving. However, in many organizations, job descriptions stay the same for years and skill gap analyses are unheard of. The result ends up being another mismatch between people and jobs that fail to help the company reach its strategic goals and short-term objectives.

3.    Interviewers are untrained and are ineffective in their hiring process.
Many employees are put into the position of making hiring decisions although they don’t have the skills or training to make effective decisions for the company. In most cases, this hiring practice represents a huge cost to an organization. Although many times training is offered, information tends to focus on legal do’s and don’ts and questioning techniques that fail to teach hiring managers the importance of determining what information is necessary, how to obtain it from applicants, and how to assess applicant motivations and behaviors accurately.

4.    Interviewers do not develop an interviewing relationship that encourages open dialogue and honest feedback.
One or two 30 minute interviews is usually the only opportunity a hiring manager has to decide if an applicant is a good fit for the organization. Many inexperienced interviewers spend more time in the interview establishing control over the conversation and content than allowing the applicant the opportunity to speak openly and comfortably about their experience, knowledge and behavioral based skills. This can create a hiring decision based on a “gut feel” rather than objective, job related feedback from the applicant.

5.    Interviewers mistakenly assume that high skill levels or years of experience equal high performance levels.
The resume looks great + experience and skill set a perfect fit + knowledge of subject matter is superior = Welcome aboard!  Many hiring managers will make the bad decision to overlook questions and discussions on behavioral based performance and hire a candidate because they are so blown away by their skills and experience.  Keep in mind that there are literally thousands of resume writing services that help applicants “expand” on their skills, as well as hundreds of books on ‘How to ace the interview and land the perfect job”. Savvy interviewers have utilized both to prepare to meet with your company. Be sure you have done your homework and understand what questions will help to identify if the applicant has the behaviors and motivation needed to be successful in the job.

6.    Hiring decisions are based on exceptional answers to one or two questions.
Keep in mind the word “exception” in exceptional. Most interview candidates can easily discuss a time or two when they handled a conflict situation successfully or took initiative to change a process that wasn’t effective.  These few examples may represent infrequent behaviors that are exceptions rather than consistent indicators of performance. The more interviewers can learn about motivation and human behavior, the more accurately they can assess applicants.  A great way to start is by understanding the common traits and attitudes shared by high performers in the company.

7.    In an effort to save overhead expenses, companies hire under-qualified candidates with plans to train them.
This is a misconception that almost always will cost the company much more money than it is worth. Placing an under-qualified candidate into a job that requires more skills and knowledge than they currently possess is a lose-lose situation for everyone involved. The morale of the new hire quickly plummets as they realize they are in over their heads, their supervisor has no time to train them and their co-workers are becoming increasingly frustrated with their barrage of questions. The loss of productivity, lowered morale of other team members, and eventual turnover makes this a hiring practice to steer clear of.

By watching out for these 7 common hiring mistakes, your company can combat one of the most expensive costs of poor hiring practices – turnover.

In a study done by Harvard Business School, they determined that more than 75 percent of turnover could be traced back to poor hiring practices. The study also indicated that most turnover could have been avoided if a successful process was in place leading up to the time of hire.  Analyzing turnover costs can be an eye opener for many organizations. Research has proven that turnover costs can range from 25-150% of an employees salary, and depending on the industry, turnover rates average 20-30% annually.

How does this impact the bottom line? Let’s look at an calculation:

# of Employees Lost x Average Salary x 35% = Annual Turnover Cost
Example: Assume a base of 500 employees with $40,000 average salary.

• Annualized turnover of 15%. Using a conservative cost estimate of 35% of annual salary.
• 500 x 15% = 75 lost employees in one year.
• 75 x $40,000 x 35% = $1,050,000 total turnover cost in just one year.

After reading this article, I hope that you are considering this hidden cost in your organization and how you can assess the effectiveness of your current hiring practices.

Whatever questions you have ~ WE CAN HELP!  We have experts available that use proven hiring practices as well as offer training to your hiring managers so they get it right the first time and avoid these hiring mistakes. This could potentially save your company thousands if not millions of dollars in just one year.