Home >> May 2012 Edition >> Re:Sources—The Road To The Future—The Failed Hire
Re:Sources—The Road To The Future—The Failed Hire
By Bert Sadtler, President, Boxwood Executive Search + Contributing Editor

These are extremely challenging times for employers who need to acquire top level talent as well as for those seeking a career change. Today, companies’ economics compel them to re-assess their talent needs in order to remain competitive and drive growth. The satellite communications industry remains ripe with new opportunities. Employers are challenged with making a “great hire.” For the candidate, finding an opportunity can sometimes be a rather difficult proposition.

sadtlerHead To assist with career searches, we asked Bert Sadtler of Boxwood Executive Search to respond to readers’ questions regarding the processes of recruitment and hiring as well as how Companies can retain crucially-needed talent. Boxwood is located in the Washington, DC, region and has success in senior level recruitment in satellite communications, government contracting, and within the intelligence community. Boxwood also provides a consulting solution for the analysis and improvement of the employer’s current recruitment process.  If you would care to submit a recruitment, hiring, or retention question for Bert to answer, please email your question to BertSadtler@BoxwoodSearch.com.

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Dear Bert,

You have mentioned the concept of “failed hire” in your column and during your interview on Federal News Radio. Please explain what you mean by “The cost of a failed hire.”

Peter C
Government Contractor

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sadtler1 Dear Peter,
One definition of the cost of a failed hire comes from a researched approach. Brad and Geoff Smart, authors of Topgrading, interviewed 52 organizations and asked them to calculate bad hires. They determined that the cost of a mis-hire for an employee making $100,000 was $1.5 million or 15X.
While 15X might seem extraordinary, let’s explore the definition of a failed hire, some causes of a failed hire and factors when considering the cost of a failed hire.
What is the timeline that defines a Failed Hire?
In today’s workplace, it is common for professionals to change their employment every couple of years.  Having a new hire change employment after two or three years would not be regarded as a failed hire. However, changing employment within 6-12 months would be. What are some of the causes of a “failed hire?”

Whenever there is a change of leadership, there is also a change in culture. Cultural changes can lead to change in employment. Examples include: acquisition, new manager of the employee, new Senior Executive leader, and change in corporate direction.

Once critical talent has been hired, an employer needs to implement a long-term, on-boarding program and retention plan. Competitors are aware of the recent acquisition of talent. New employees are susceptible to second guessing their decision and can be receptive to accepting a “better option” during the first six months of new employment.

A failed hire can occur when the expectations of the new employee and the employer don’t match.  Employers want results. Sometimes early results have to be measured by the completion of tasks and not solely by securing revenue. For example, securing new business in the government-contracting arena can frequently take companies one to two years. The best means to measure success is to establish a timeline with steps along the way that will eventually lead to revenue and then measure against the accomplishment of the steps. 

As part of issues with expectations, failed hires can be caused by inflexible compensation plans. If a new hire is expected to deliver revenue in new market areas, time needs to be given in order to develop the opportunities. One option would be to create a short term compensation plan measured against the development of new opportunities, and then implement a long-term compensation plan based on revenue.

A failed hire can occur because the new employee did not solve the employer’s problem. Companies acquire talent because the talent can solve a “problem.” It is critical to define the “problem” prior to starting the recruitment and then to make sure the candidate is capable of solving the problem and has a plan before the candidate is hired.

A failed hire can be the result of recruiting short-cuts. Examples would include:

sadtler2 Too few candidates resulting in the hiring of “the only one-available candidate” versus recruiting several highly qualified candidates.
Calling references before investing the time to get to know the candidate first.
Not spending time during the interview process to develop chemistry and then jumping right into an offer.

What are some factors to consider when determining the cost of a failed hire? For employers who have experienced a failed hire, the costs are easy to measure. Factors can include:

The cost associated with the employer’s reputation in the business community as a less-than-ideal place to work.
The cost associated with the loss of current and potential opportunities when new talent leaves.
The cost associated with the lost leadership momentum for direct and indirect reports when a new manager leaves.
The cost associated with having recruited the new talent and the additional cost of having to launch a recruiting “replacement campaign”.

The cost of negative feelings by the departed employee as a member of the workforce with a competing employer.

A failed hire is the last thing that an employer or an employee wants to occur.  The employer and employee share the responsibility of avoiding this. Employers should clearly define the “problem” they need a new employee to solve, and work toward hiring and retaining someone who can accomplish this. The employee has the responsibility of understanding what the “problem” is and delivering an agreed to solution.

I hope you have found this to be helpful.
Bert Sadtler