Let’s start with a little bit of math. We’re going to calculate just how much mis-hires are costing your company in dollars and hours. These numbers are based on an interview I had with a CEO and they are conservative.
Now, replace the numbers to reflect that of your own company, and tell me what answer you get
|Number of hires last year?||1000|
|Percentage that have turned out to be mis-hires, falling short of the minimum quota?||75%|
|Conservative estimate of the cost of mis-hiring?||$100,00|
|Estimated average number of hours wasted by managers and others, preventing and fixing problems caused by the mis-hires?||100 hours|
This breaks down to:
750 mis-hires annually X $100k cost = $75 million in cost.
750 mis-hires annually X 100 wasted hours = 75,000 wasted hours.
Most companies only successfully hire A-Players about 25% of the time, wasting millions of dollars or hours, both scarce resources that can definitely be put to better use. I wrote about why your company should hire mostly A-Players and how to go about doing so (and I suggest checking it out, after reading this article of course).
Intuitively, you know that you want A-Players. They “carry” the company, while C-Players suck the creative, positive energy out of the company. You may think this might not be possible with the current hiring processes in the market today.
This is where Topgrading comes into play.
“The ability to make good decisions regarding people represents one of the last reliable sources of competitive advantage, since very few organizations are very good at it.”
— Peter Drucker
How We Normally Hire
Too often our candidate interview process gives an illusion of thoroughness. However, it lacks a method that allows the interviewer to separate the high performers from the low. Sadly, what passes for “best practices” often includes these steps:
- A cursory job analysis is created.
- That analysis usually leads to a vague job description, which perhaps only identifies six competencies out of dozens that are crucial for success.
- These meager competencies are then investigated through a few (easily faked) round-robin competency (behavioral) interviews, each 50-minutes or less in duration.
- Conclusions are “verified” through cursory reference checks that are only marginally useful because most companies don’t allow managers to take reference calls and besides, reference sources are provided by candidates who “salt the mines” with buddies.
You might be thinking that this sounds reasonable enough. Surely, this process will yield some top level candidates? Through years of experience I know that sadly, this isn’t true. At best you might luck out with 25% of A-Player hires.
Why We Mis-Hire
What the process above lacks is a way to eliminate the three biggest problems in hiring, which are:
- Rampant dishonesty by low-performing candidates who can easily fake their resumes and their interviews.
- Insufficient information, because most companies use superficial, 45-minute competency (“behavioral”) interviews to screen candidates. Read up on “Acing that job interview” online, and you’ll find tips on how one can control such interviews and easily hide weaker points!
- Lack of verifiability, as most reference checks are practically useless. They are either just fact checks with Human Resources departments, not done at all, or are conducted with the candidates’ buddies as references. Based on this, even the weakest of candidates can get away with problem #1, rampant dishonesty.
Yes, Resume Lies Are A Big Problem
A survey by CareerBuilder.com reports that out of 2,000 people, 58% of the candidates lied on their resume. The study showed that prior to the recession only 33% of interviewers took more than 2 minutes to read resumes, and because of rampant lying the figure rose to 42%.
I’m going to reiterate, it is easy for C-Players to write a resume that looks like that of an A-Player. There are dozens of online articles that help with doing just that. Most C-Players know they can get away with faking it because reference checks are superficial.
I’m going to show you how Topgrading eliminates these lies and allows you to consistently hire more A-Players than any other method out there.
Eliminating The Lies With Topgrading
The most effective part of our process is the "Truth Serum", which has worked to scare away undesirable candidates for decades. This simple step has worked over and over again and I swear by it. All company application forms must inform candidates that a final step in hiring is for THEM (not you) to arrange reference calls with former bosses and others.
Aside from that, we also ask for salary history and boss ratings. Because candidates know that they have to arrange reference calls, we find that the information they provide for both turn out to be amazingly accurate. Let’s explore this and other methods a little more:
- Use the “Truth Serum,” which for more than three decades has motivated all candidates, even the C-Players, to tell you the whole truth in interviews. As I’ve mentioned above, at every step in the hiring process, remind candidates that a final step before receiving a job offer is for THEM to arrange reference calls with former bosses and others.
There are a dozen “Yes, but Brad that won’t work because…” concerns about this approach and we will address them in the future. However, you’ll have to trust me that when injected with the “Truth Serum,” most C-Players will drop out (because they likely faked their resumes) and A-Players will happily arrange those reference calls.
- Use the Topgrading Career History Form, which produces the Topgrading Snapshot. Candidates fill out a Career History Form that has the truth serum and asks for full compensation history, honest boss ratings, and much more. This form produces an overview snapshot of each candidate. With this, you’ll immediately be able to screen out weaker candidates, saving you not only time, but more importantly, ensuring you’ll only interview sharp, well-qualified candidates.
- Conduct a Topgrading Interview that can possibly double your hiring success from 25% to 50%.
- Recruit a tandem interviewer to do these interviews with you, because two heads (and minds) are a lot better than one. You can learn a lot by watching a candidate while your counter interviewer asks questions. Conduct the Tandem Topgrading Interview with a trained tandem interviewer.
- Conduct reference calls with former bosses. Follow through on #1 — ask the candidate to arrange the calls and you and your tandem interviewer talk with those former bosses.
Benco Dental And The Cost Of Mis-Hires
In 2006, Managing Director of Benco Dental, Chuck Cohen and Vice-President, Culture & People (HR) George Rable initiated Topgrading. Benco Dental is the largest privately held dental supply/equipment company in the United States.
Prior to rolling out the Topgrading methodology, George Rable received some pushback from managers who complained of not having 3 hours to conduct an interview. After asking managers for the estimated cost of a mis-hire, George was able to show that in the previous year, mis-hires cost the company ⅓ of its profits!
“Topgrading has become a key component of Benco Dental’s culture. Managers have bought into the need to conduct thorough screening, Topgrading tandem interviews and background checking. We believe our biggest success to date has been our hiring in management. This has a direct impact on the quality of associate hiring as excellent managers hire the best associates,” explains George Rable.
For managers, hiring improved from 27% to a projected 60% of A-Players, as rated by the CEO and two top HR managers. Since beginning Topgrading, their success hiring and promoting has improved by 33% (2007), 39% (2008), 43% (2009), and 47% (2010).
They initially conducted beta tests in the sales area, and after a successful testing period, they rolled out Topgrading throughout the company.
More case studies HERE.
Living The Dream
The simple fact is that this method helps you develop and retain top talent. You will dramatically change your organizational culture and raise the performance bar for everyone, attracting more top players to your team.
A-Players like to surround themselves with other A-Players. The result, as George Rable states above, is improved organizational performance. Not to mention the long-term benefits of saving time and money in your organization.
On a more individual level, having employees that you can rely on means you will be able to delegate tasks with peace of mind.
So, before I end this piece, I’d like to ask you to go back to the beginning of the article and calculate how much your mis-hires are costing your company. Would you like to see this figure change? Leave a comment below.
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