How Bad Hiring Decisions Can Hurt a Good Company


Tony Hsieh the founder of once shared in an interview that bad hiring decisions had cost the popular online retailer “well over $100 million.” After summarizing how their hiring mistakes had led to this astonishing number, he offered the following gem:

“We learned instead of hiring quickly and firing slowly, really it should be the reverse. We should hire slowly and fire quickly when it’s not the right fit.”

Zappos is so focused on hiring the right team that they even pay people $3,000 to quit.

What is the Cost of a Bad Hire?

The difference between getting the hiring decisions right versus on-boarding the wrong people is huge. No one would argue with the idea that from a purely financial perspective, hiring mistakes are expensive. In fact, according to a global survey conducted by CareerBuilder, 27 percent of companies in the UK report that a single hiring mistake costs more than £50,000.

The truth is, however, there are many aspects of a business that simply can not be recorded on an income statement, and these silent, “soft expenses” can be even more damaging than the straight-forward financial ones. Hiring the wrong people doesn’t just eat up valuable resources, it affects employee moral, commitment, and focus. In the end, it can lead to missed opportunities, impairs business performance, and can significantly hurt a company’s culture and brand.

Getting the Hiring Right… The First Time

After working for several decades as recruiters in the Fintech industry, we have noticed that the companies that tend to get the majority of their hiring decisions right all have two key qualities in common:

  1. They know who they want now in their company and what these people could become in the future. The best hiring decisions are not short-sighted. These companies are not just considering what a candidate can do now, but what he or she may potentially be able to do in the future. It’s well know that both Amazon CEO, Jeff Bezos and the late Steve Jobs would frequently single out people with exceptional and unusual talents and skills that were often unrelated to the positions they were applying for. Companies committed to hiring the right people put a significant amount of emphasis on personality and cultural fit. They look for the candidates with passion and initiative, those with the willingness to learn, to ask questions, and figure things out.
  2. They know which questions to ask. These companies ask questions during the hiring process that give them key insight into how well a given candidate will fit into the position as well as the company’s culture. For example, entrepreneur and inventor Elon Musk routinely asks job candidates to recall a problem they solved and explain how they arrived at each step along the way. The more detailed and enthusiastic the answer, he explains, the more it shows that they really thought through the problem.

Bad hiring decisions are bad for any business, but they can be particularly painful to those companies that are either small or experiencing a period of rapid growth. The good news, though, is that getting the hiring process right isn’t rocket science. It is a skill that can be learned like any other. The companies that make the investment to acquire this skill are the ones that will not only hire the right people, they will hire the best, most loyal talent, as well.

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