Human resources and CRM conceptA bad hire can be costly—anywhere from $20,000 to $30,000. At least that’s according to an infographic from the National Business Research Institute (NBRI). The infographic, “The cost of a Bad Hire in the Highest and Lowest Paid Position,” researched the costly effects of bad hires for the highest and lowest paying jobs.

It examined the following five main factors to help estimate the cost of a bad hire: 1) loss in productivity – the annual salary of the employee, 2) training costs – 25% of the annual salary of the employee, 3) HR costs – calculated using the average HR Generalist’s salary, 4) interviewing costs – calculated using the average HR Generalist’s salary; and 5) employment ads for a new hire – anywhere from $100 to $1,600.

zohoAccording to the data, lower paying jobs – such as fast food cooks and farm workers – usually earn a salary range of $18,600-$20,320; yet, one bad hire for any one of these positions can cost a company an average of $25,000.

And as the salary for a position increases, so does its costs if the hire turns out not to be a good fit. The infographic showed how the highest paying medical jobs earning salary ranges of $191,000-$233,000 can cost a business nearly $300,000 if the person ends up being a bad hire.

And why do companies make such costly decisions when hiring?

The infographic explained that these poor choices are due to needing to quickly fill a position (43%); hires being unqualified for the job (22%); sourcing techniques needing to be adjusted per position (13%); fewer recruiters able to sift through applications due to recession cuts (10%); and, failing to check references (9%).

LiniumEach one of the reasons above lead back to the same area: the hiring process. The reasons companies end up with bad hires (and broken wallets) is because they are failing to properly assess and select qualified candidates during the hiring process.

To have the best chance of hiring top talent who will not only benefit your business’s bottom line, but who won’t add to the turnover rate, you must adopt techniques during the assessment portion of your company’s hiring process that will effectively sift through the mass of candidates to select those who are truly qualified for the position—qualified not only from skill set but cultural fit.

And how do you accomplish this? Below are four necessary steps when assessing qualified candidates, and decreasing the probability of a bad hire:

Pre-testing

A Harvard Business Review article advises recruiters, when hiring, to first test and then interview.

Most companies have a standard hiring regimen: Recruiters start by reviewing résumés, move on to phone or face-to-face interviews with the most promising candidates, and then draw on various tests, often including psychometric tests, to determine which applicants are the best fit. Our research suggests that this approach is backward.

laddersThe article explains that businesses can “reduce costs and make better hires by using short, web-based psychometric tests as the first screening step.” These types of tests efficiently weed out the least-suitable applicants, which leaves recruiters with a smaller, better-qualified pool who can undergo the more costly personalized aspects of the process, the article says.

The writers believe that the “test-first approach” makes more sense than the common “backwards” way of recruiting because:

- Research shows, the article says, that nearly 50 percent of resumes contain false information, rendering them ineffective as an initial screening tool.

- Web-based psychometric tests have helped make testing less expensive and more convenient;

- And studies show that pre-testing applicants is effective. The article sites a UK energy company that used the Dependability and Safety Instrument (DSI), an 18-question online assessment. Having concerns about absenteeism, the energy company “gave the DSI to 136 new employees and tracked their absences over the following six months; it found that workers who scored in the highest 30% of the group were 2.3 times as likely to have perfect attendance as workers who scored in the bottom 30%.”

Try implementing pre-testing into your assessment process to help eliminate applicants who don’t (or won’t) fit the bill, and to reduce hiring costs and time.

Interview Questions

In his article, “The Most Important Job Interview Question,” Author Anthony K. Tjan says that employers need to think of top talent as the customer. “Top talent will always have the balance of power over the employer, not the other way around,” he writes. “This has big implications for that typical barrage of evaluator-type questions.”

Tjan says instead of asking candidates “skill” and “will” questions, such as 1) Why are your skills right for this position? 2) Tell us more about your last job? How are you going to add value? and 3) What is your work ethic?

Employers need to be more humble, remembering that as the ultimate customer, top talent has choices. He advises employers to ask, If you were given this opportunity, would you take it?

“Understanding or at least having a sense post-interview whether the candidate — the customer — really wants this job or if he or she is just “shopping” should be a goal of any good interview and evaluation process,” Tjan explains.

Try-outs

Nina Brody, head of talent for Take Care Health Systems in Conshohocken, Pa., wanted to reduce early-stage turnover, attract more high-quality candidates and leverage technology for more-efficient hiring, writes Dave Zielinski for the Society of Human Resource Management.

So, when hiring, she decided to use Virtual Job Tryout, “an interactive pre-employment test that delivers a customized employment brand message while allowing candidates to test drive a variety of realistic job demands through multi-method, simulated work samples.”

In layman’s terms, the tool allows candidates to virtually “tryout” a job while simultaneously giving employers a better idea of whether or not the candidate will be a good fit.

Created by Shaker Consulting Group, Virtual Job Tryout has candidates respond “to a range of situations that occur every day in the lives of your current employees in that position.”

This is a great step when assessing potential hires because it will not only give you a better idea of how the potential employee will fit into your business’s culture and how he or she can handle the required responsibilities, but will show the employee the exact same things. This may be yet another way to eliminate unqualified candidates and reduce bad hires because, after “trying out,” applicants may remove themselves from the competition.

Pre-employment Screening

The University of Virginia has a process of giving selected applicants a pre-employment screening (or screenings). The following are screenings it requires, depending on the position (and screenings you can incorporate before officially hiring a worker):

- National Sex Offender Registry Check

- Criminal Records Verification

- Pre-Employment Drug Test

- Pre-Employment Physical Examinations

- Driving Record Verification

- Credit Check

- Degree/Educational Verification

Again, not all of these will be necessary for every position, but they are important to conduct before making the final decision to hire an employee. You don’t want to allow anything to slip through the cracks in the final stages of the assessment and screening processes.

A special thank you goes out this month’s Leadership Sponsors: Zoho, TheLadders, and Linium Staffing. Please visit their sites to understand how these quality services can elevate your interviewing and assessment practices.

 

 

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