Most of you will know the alarming statistics and bad press around bad hires. A U.S. Department of Labor study estimates that the average cost of a bad hiring decision can be equivalent to 30 percent of the first year’s potential earnings. In real terms, this could mean an outlay of $7,000 to replace a salaried employee and up to $40,000 to replace a senior executive.
And while it’s important to bolster your hiring processes so you don’t make bad hires, the reality is that selection processes are at best only about 70 percent reliable,(assuming you use assessment centers). The typical hiring process using structured interviews, work samples, and skills tests is only around 50 to 60 percent reliable in predicting the performance level of a candidate. This means that perhaps only 1 out of 2 hires will actually do what they say on the tin and be considered a good hire. It really is no surprise as this Leadership IQ study reveals that 46 percent of new hires fail within the first 18 months. It’s inevitable given the limitations of the hiring process.
So, while we should work on eliminating bad hires at the outset, the process itself is fallible and recruiters should face up to the fact that even with your best efforts, 1 out of 2 hires will be “bad.” This means that recruiters are constrained by the limitations of the assessment process, and therefore, at least some of the responsibility for rehabilitating and not firing bad hires should rightly lie with internal talent management teams, or your company will have extraordinary and unnecessarily high levels of employee turnover.
This means developing an internal talent management process that acknowledges that the hiring process is not perfect—it’s actually only 50 percent correct. The process also needs to be proactive (and therefore more effective) in its dealing with inevitable bad hires, rather than reactive, (and woefully inadequate) in its dealings with bad hires.
To do this, I think we need to look past the idea of a bad hire, which is more of an expedient journalistic label, and focus on the underlying reality or opportunity, which is that all new hires are a partially finished product. That is, they are likely to be suited to a role to a greater or lesser extent, but who with the right support, attitude and tweaking of the role can progress into a better employee. The reality is that half of new hires will not be a lock-and-key fit and will need to be molded and developed into the perfect employee. And employers should allow for that.
This is why I think that it may be time for a new incentive such as, ‘improved-new-hire-award’, which could be brought in to laugh in the face of the bad hire concept. This award acknowledges that the hiring process, as a rule, does not produce the finished product. This new concept understands that it’s the role of the employer and the employee to jointly develop and improve the new hire into the finished product, a process which should be recognized and rewarded.
Of course, not every so called bad hire is salvageable. The wrong attitude can place severe limitations on the process of developing a bad new hire. But, a so called bad hire with the right attitude can develop into an engaged and performing employee, as long as he or she has the right support and opportunities from the employer’s side.