Hiring is Less Accurate Than Flipping a Coin
Why is executive hiring so chancy?
A case study from the book, You’re Not The Person I Hired!: A CEO’s Survival Guide To Hiring Top Talent (Boydel, Deutsch, Remillard) illustrates the problem.
The failure rate of executive hires ranges between 32%-56% (Ahem. My search firm’s failure rate is significantly below 10%. Over 25 years.) so high failure rates have somehow come to be accepted as normal (yet another proof of why it’s commercially smart to use executive search firms).
Let’s name the common frustration of employing people who cannot deliver the expected results for what it is: hiring failure.
The 56% Hiring Failure Rate Problem
When companies employ a professional earning a six-figure salary, they expect the employee to “hit the ground running” and produce results quickly. Yet evidence indicates (based on research and surveys of 20,000+ hiring executives over the past 15 years and a review of the published literature on the subject of executive failure) that roughly 56% of newly hired executives fail within 2 years of starting new jobs.
Now do the math. We know that a failed hire costs the employer, conservatively, 3 x TRP (total remuneration package). So that $100,000 failed executive just cost the company $300,000 (3 x $100k = $300k). That’s an expensive mistake.
So a 56% hiring failure rate is literally worse than flipping a coin (which has a 50% chance of being heads or tails).
Think of it this way:
- If a comparable failure rate happened on the manufacturing floor, the plant would be closed
- If a company’s financial statements were only accurate 56% of the time, lawsuits would result
- If invoices sent to your customers were only accurate 56% of the time, you’d probably be out of business
- If payroll checks issued to employees were only accurate 56% of the time, you’d have a mutiny, litigation, or both.
Yet companies continue to live with a 56% rate of hiring failure. Why?
The Crux of the Problem
Extensive research suggests that the root causes of hiring failure are:
- Focusing on irrelevant past experience and skills
- Nebulous expectations
- Failure to clearly communicate expectations up front
- Flawed hiring processes
Let’s sum it this way: when a company doesn’t know what they want, they won’t— and can’t— recognise it. For example, let’s say that a company wants to hire a Superstar who will “succeed”. Fine.
But what do a Superstar and success look like?
If you can define or articulate what a Superstar looks like or what success means in concrete terms, eg, dollars, cents, percentages, time, headcount, and other hard numbers, then you’re significantly lowering that 56% failure rate in your favour.
Any new employee will fail to meet expectations if those expectations are not clearly defined by the employer.
So save money and flip a coin when employing expensive executives.
Fix your hiring process:
- aim to attract the top 25% of candidates rather than the bottom 25% and figure out how to attract them
- insist on clear, precise, and quantifiable definitions of success; how will you recognise it when you see it?
- impose rigor, discipline and psychology in assessing and evaluating candidates
- the jury is in and has been for decades: astute usage of commercially relevant psychometrics lets you predict the performance of a person before you employ them. And it’s a lot smarter than flipping a coin.
To be continued…