Hire Power: Mistakes Can Be Costly for Companies

 By Anne Stuart

The ultimate cost of making a bad hire—in any field—is typically far more than that worker’s annual salary, human resources experts say.  It’s getting harder and harder to find top financial talent—and bringing the wrong person on board is likely to be a costly error.

The good news: A few smart strategies can go a long way toward improving your organization’s chances of making a good match. 

The Talent Crunch

It’s no secret to anybody involved in recruiting and hiring that, even in the current economic downturn, it’s tough to find top finance and accounting candidates.  In fact, that category is near the top of just about every “hottest jobs” list, and the U.S. Department of Labor’s Bureau of Labor Statistics projects that the number of available accounting positions alone will grow 18 to 26 percent by 2014. Specialties most in demand include internal auditors, public accountants, financial analysts and senior accountants—those with several years of advanced experience. 

Experts attribute the finance and accounting talent shortage to several factors:

Ø      A dip in the number of students majoring in those fields during the 1990s, leading to a shortage of experienced professionals today.

Ø      A sharp increase in the number of financial professionals that companies need to help them comply with the ever-more-complex raft of requirements established by the Sarbanes-Oxley Act, the Health Information Privacy and Accountability Act and other sweeping government regulations.

Ø      A desire on the part of many employers to hire finance and accounting professionals with additional expertise, such as well-developed technology or communication skills.

As a result, of course, it’s more important than ever before to hire right the first time. 

The Cost of Failure

Many human resources experts say that hiring the wrong employee can cost a company two to five times that person’s salary—possibly far more for a top executive or a position requiring highly specialized skills.

Besides the actual compensation, the employer’s hard losses often include:

Ø      Search, recruitment, interviewing and advertising costs

Ø      Relocation and training expenses

Ø      Severance or unemployment payments

Ø      Legal fees (for addressing a real or potential ex-employee lawsuit) 

Ø      Fees for temporary staffing

…and, of course, all the costs associated with finding a permanent replacement.

Hidden costs—those that are tough to quantify, but no less real—include decreased productivity, missed opportunities, dissatisfied customers, wasted management time and employee morale damaged by a bad hire’s poor performance or abrupt departure.

The Road to Success

Following are a few tips to help employers boost their chances for success right out of the gate with a new hire:

Take some time. Companies are often in a rush to wrap things up, but—as Benjamin Franklin told us more than two centuries ago—haste makes waste.  The long-term damage from making the wrong match almost always outweighs any short-term gains from filling a vacancy as quickly as possible.

Start from the same page. For an employer, that means providing a clear, detailed job description that leaves no room for ambiguity.  Such due diligence can go a long way toward preventing the misunderstandings that often underlie a hiring mistake.

Ask the right questions. Job interviews are the best chance to gauge how well a particular candidate will fit into a job, a team and an overall corporate culture.  But busy managers sometimes hurry through their part of the process, and then send candidates to talk with junior employees who have little or no hiring experience.  It’s more effective to train everyone involved in hiring in basic interviewing techniques, then assign each team member to query candidates about a different area.  That approach helps eliminate information gaps, providing a more comprehensive picture.

Keep the conversation going. Time-pressed managers may welcome new employees on Day One—and then leave them alone until a problem gets too big to ignore. Newcomers often stumble a bit right out of the gate, but managers who are paying attention can quickly get them back on track.  For exactly that reason, many companies schedule regular manager-employee check-in meetings during a new hire’s first few months on the job.  Such sessions offer the perfect opportunity for making small course corrections that can prevent bigger conflicts down the road—which, in turn, helps both parties from ever having to view the relationship as a massive mistake.