Entrepreneurs and human resource managers obsess over hiring. To find people with the best skill set and cultural fit, hiring managers analyze handshakes and resumes, invest in personality assessments, and engage in internet sleuthing. Yet despite these efforts, bad hires happen. In fact, according to research by Glassdoor and the Brandon Hall Group, 95% of companies admit to recruiting the wrong people each year. And more than one-third admitted that they were unaware of how costly hiring the wrong person can be.
The real cost of a hiring mistake
The Chartered Institute of Personnel and Development (CIPD) has estimated that one bad hire can cost an organization as much as 2.5 times what that person makes in a year, after accounting for recruiting, replacement, and onboarding expenses.
The financial impacts of hiring the wrong person are quantifiable, but many professionals believe that the worst damage comes from the impact on morale and productivity. Good employees get burned out making up for the bad apple that isn’t pulling his or her weight. Bad attitudes spread like a virus. Before you know it, your company is in danger of losing your top performers, too.
Why do bad hires happen?
With so many companies admitting to recruiting the wrong person, you may think that making bad hiring decisions is unavoidable. Companies invest so much into the hiring process. Does finding the right person just come down to good luck in the end?
We don’t believe so. The majority of hiring mistakes are the result of poor decisions. People recognize candidates lack the necessary skills and experience but make offers anyway because they can’t bear to look at another resume or conduct another interview. When the number of resumes or the pool of candidates is not as good as they were hoping for, they’ll hire the best of the lot and hope it works out due to a need to fill the position. Pressed for time, people don’t bother checking references, believing that most former employers won’t give honest feedback anyway.
Filling open positions can be difficult, but with the quantitative and qualitative costs of making the wrong choice so high, a bad candidate can be even worse than no candidate at all.
How to attract and retain the right people
When the pool of candidates is diluted with mediocre prospective hires, how does a company attract and retain the best people? Competitive salaries and benefits are the first steps. Here are others:
Have a strategic plan.
Without a plan, what do you tell prospective hires about your company’s future? Smart people expect documented strategies and a game plan. Keep it straightforward and easy to communicate.
Know what you want.
Have documented job descriptions for every position. You have to know what you want before you can find it.
Invest in training and development.
These aren’t a perk – they’re an expectation. Training and learning are about more than just technical competence or continuing education hours. They’re about career growth and the development of leadership skills.
Train your managers.
Competent managers that understand people are critical for retaining your best employees. Your managers need training as much or more than any other employee.
Provide the best technology. The cost of tools that help your employees do their jobs and serve clients are a small price to pay to please valuable employees. The best employees expect the best tools.
Offer authentic work/life balance.
The way the workforce views perks is changing. Flexible work hours and telecommuting policies show that you understand that employees place just as much importance on spending time with families and pursuing passions as they do on earning money.
Accounting and finance departments deal with challenges every day. You can reduce or eliminate the challenges that come from making bad hiring decisions. Even if your existing staff has to pick up the slack for a while longer, this burden is temporary and far less costly and damaging than hiring the wrong person.
For more on how to recognize good vs. bad accounting and finance talent, check out our infographic.