Hidden Costs and Disillusion: The tired face of modern recruitment

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How can we ensure we are making the right decisions in the recruitment process, and what are the hidden costs of a bad hire?

Sourcing Solved MD Iain McKenna believes we must approach recruitment from a more strategic angle if we are to attract and retain the best talent to support company growth.

“Many organisations, both large and small, are attracted to large branded recruitment companies as we all assume this comes with a guarantee, something that truly defines value and quality. However, if you peel back the skin, the reality is that the brand is only as good as the person delivering the search.

Glassdoor and Brandon Hall Group's research in 2015 revealed that a staggering 95% of companies admit to bad hires. Of these, 69% were down to a “flawed interview process”, with 22% reporting “insufficient talent intelligence prior to recruiting”. Yet despite this, we continue to look for a quick hiring fix, sometimes happy to delegate the responsibility to HR and not involve all the key stakeholders.

According to The Recruitment & Employment Confederation in 2017, 85% of HR decision-makers admit their organisation hired the wrong person, yet 33% believe that these mistakes have cost their business nothing!

But clearly that cannot be correct; the costs attached to a bad hire are rarely considered. The scenario below happened to a former client of ours. They selected an executive search business, who, on the surface, appeared highly qualified. They advertised procurement roles on their website and had hired people in the same region at an executive level. After a three-month search, a candidate was chosen who came across very professionally. Unfortunately, it soon became apparent that this person lacked the ability to prioritise tasks. This created mistrust among stakeholders and ultimately created friction amongst his team. The hire lasted six months.

It wasn’t until the individual was given notice, that they truly discovered the hidden cost attached to that hire. Approx. £79,000 was lost in unrecoverable salary, £21,000 in management time and training and £47,000 in recruitment fees. In total this bad hire cost them close to £147,000 (more than the annual salary they would have paid the hire and they had to start again).

Avoiding the wrong hire

To avoid making the wrong hire, it's important that we take ownership. If you look at LinkedIn jobs, for example, the ownership of many companies’ hiring process lies with either HR or an internal recruiter. Ask yourself whether they can, without stakeholder guidance, effectively qualify and assess a professional's deliverables if they have never performed the task or worked in the industry. How can they decide who's right and who's wrong for the business without support from the functional managers?

Finding the right hire

If you research the psychology of selling, you are likely to come across the "Halo Effect". This is when a well-known brand stimulates a feeling or a memory. They may use a celebrity or a positive role model, which leads you to believe they possess similar qualities. As human beings and consumers we buy on emotion: the strength of a brand, the bright lights. This may quench our emotional thirst but it doesn't necessarily ensure you are choosing the right company to support you.

Having a well-known brand working for you in the marketplace certainly may help to attract talent, however, don’t rely on this alone. Attracting the right executive requires more than a strong brand.

Take the bull by the horns and perform the evaluation process yourself or select an external company who has hands-on industry and professional experience, rather than having simply recruited in your industry or having a high profile brand. A good external recruitment partner will be able to identify and approach passive candidates; the high performers who only sporadically look at job openings. Using this process ensures that good talent doesn't slip through the net.

In a competitive market, it’s imperative that you can sell your vision and brand.

And don't forget to sell, sell, sell. In a competitive market, it’s imperative that you can sell your vision and brand. It is however important to get the balance right; if you oversell the opportunity you risk disillusioning the candidate, which could result in the the position not meeting their expectations. There may be a passive candidate who might be ideal for you, but they don’t know they want to move and possibly haven’t considered it; they need to be sold to, but realistically.

Clearly HR have a big role to play. Work with HR to develop additional measures if needed to asses behavioural and management styles. However, don't get bogged down in this; you may remember the ex-chairman of a large UK retail UK, who performed particularly well in his psychometric tests but was, ultimately, ill-qualified for the role.

Lastly, don't get caught up in comparing what your competitors or the market pay, or what the person currently earns; great talent will feel demotivated if you under offer: why would they move and join your business? Focus on what this great talent can contribute to your business. How will this person impact you and give you that competitive advantage, and therefore what is the right offer for them?

It’s time we recognise that recruitment is no less strategic than other aspects of the business and deserves equal time and investment if we are to see the desired results: increased staff retention, long-term cost reduction, and a positive candidate experience.”

Iain McKenna is Founder and Managing Director of executive search consultancy Sourcing Solved, specialising in placing procurement executives across Europe and the UK.