Sometime back Tony Hsieh, CEO of Zappos, revealed that his mistakes in hiring may have cost the company over USD 100 million (1). According to him, the relative inexperience of his startup was mostly responsible for these recruitment blunders. However, we know that this phenomenon is not limited to the startups at all. Studies show, mis-hires at the top cost the US economy USD 14 billion per year (2). Forty percent of the CEOs are replaced within first 18 months (3) and two-thirds of them are shown the door by the end of fourth year (4).
In sporting terms, this can be compared with Spanish footballer Juan Mata’s failure to deliver the expected results in Manchester United. In exchange of a cool sum of USD 60 million (5) he was brought in from Chelsea, only to be used in wrong positions causing disaster and humiliation both for the team and the footballer. Two-time world champion Fernando Alonso’s similar high profile yet frustrating excursion (6) with McLaren Formula 1 Team in 2007 is another case in point.
Notice how both in organizational terms and from the team perspectives, these incidents result in low employee morale, missed opportunities and public embarrassment the impact of which in financial terms can hardly be measured with accuracy.
Now picture this against the potential gain of hiring the right personnel for your business. According to Professor Boris Groysberg’s (Harvard Business School)estimation, even for a USD 100 million business, a 10 percent improvement in the assessment of a potential hire can earn an additional profit of USD 2 million and increase the market value by at least USD 30 million (7). Could there be any excuse then for not getting this right? One of the major reasons for repeated hiring disasters is a failure of making a subjective assessment of the prospective hire. In organizational terms too, 20th century poet Edgar Guest’s words prove to be extremely relevant:
“You are the person who has to decide.
Whether you’ll do it or toss it aside;
You are the person who makes up your mind.
Whether you’ll lead or will linger behind.
Whether you’ll try for the goal that’s afar
Or just be contented to stay where you are.”
Much like in educational parlance, subjective evaluations receive a lot of flak during recruitment processes mainly because of the possible biases candidates are exposed to. There is always a lurking danger that certain factors related to race, color, gender, physical attributes or abilities can be used against the potential recruits. But one must remember subjective assessments hardly involve such things. Instead, it aims at going beyond the typical interviews to assess someone’s person–environment fitness (8).
Some aspects like contextually sensitive actions, abilities of complex thinking and decision making can hardly be measured with precision through objective ratings. Behavioral traits like energy level, assertiveness, independence etc are taken into account to understand a person’s suitability with the various conditions he or she is going to be exposed to. After all, simple IQ tests are never going to be adequate for hiring top talents.
A Question of Compatibility
A thorough understanding of a candidate’s distinctiveness; his sufficiency in meeting the demands of the job; goals and aspirations he or she shares or does not share with the company often lead to making a better hiring decision.
In 1989, Kodak was in search for a replacement of its then retired CEO Colby Chandler. The choice came down to two persons – Phil Samper and company veteran Kay R Whitmore. The board decided to promote Whitmore who had a known preference for the company’s film business. In September 12, 1989, The New York Times reported, “Mr. Whitmore said he would make sure Kodak stayed closer to its core businesses in film and photographic chemicals.”
Whitmore lasted three years at the helm during the course of which, and the following years, it became obvious how costly a mistake Kodak committed in hiring him for the top post. Samper had a deeper appreciation of the digital photography technology, something that Kodak invented itself. It was the way forward for the company which Whitmore and subsequent CEOs in Kodak failed to take note of. Whitmore’s conventional approach might have gone unnoticed in a situation where the company is enjoying a good run. But Kodak was desperately trying to restore its reputation then.
An impartial assessment also leads to a better predictability of a candidate’s relationship with his/her peers and superiors, the breakdown of which invariably leads to the employee leaving the company dissatisfied.
John was always a charismatic go getter, something that brought him rapid success and growth despite occasional mistakes on the job. He was promoted as an executive level sales manager and needed someone to assist him in his work. The company chose Jennifer to support him. Jennifer too was an ambitious person, but she always liked keeping the company’s long term goals in mind. In her entire career, she rarely took any rash decision in spite of the obvious lure of achieving immediate and often glowing results.
As she took over the job and learned more about John’s ways of working, she made efforts of molding her approach and supporting John’s plans. She also tried to warn John of some of the long term implications of his decisions. But John was never the one to take notice of those and since his approach paid immediate dividends the company remained happy. After some months of struggle Jennifer left the job dissatisfied. Why, at the first place, did the hiring team fail to observe Jennifer’s different approach to work than John?
In their studies, Jesús F. Salgado and Silvia Moscoso, University of Santiago de Compostela, Spain, showed the shortcomings of run-of-the-mill behavioral interviews (9). When asked to testify a particular competency, a candidate with long work history, good knowledge and social skills has a lot of examples to draw inspirations from. But a series of one-on-one meetings tend to reveal enough information to anticipate someone’s fitness in various organizational situations.
Skillful talent scouts use various ingenuous
methods to understand a potential hire’s core
competencies. At one point of time or the other,
almost all recruiters experience a bad hire.
So there remains a considerable pool of
past instances to fall back on and help
formulate tactics that prove effective
for all the concerned parties.
In this regard, one of the most valuable tools is to give the candidate fact-based situations where he or she will not be able to get away parroting something from his past. It is important to remember that different people may address a situation differently. There is hardly one way of solving a complicated issue.
As Doug Conant, Chairman of the Kellogg Executive Leadership Institute, pointed out, “The black-and-white, right-or-wrong decisions happen before they reach the CEO’s office. The gray area is where the CEO lives and proves his or her worth.” The success of the decisions undertaken may also depend on a number of factors. But with such an approach to hiring a candidate’s primary competences cannot remain hidden for long.
Clarity about the organizational philosophy, expectations and environment is a prerequisite here. An experienced recruiter is going to carefully look into all the following questions and more.
Is this person a leader or an entrepreneur at heart, a micro manager or someone with a laissez-faire approach, a profit maker, dollar stretcher or both? What are the capabilities he/she is more inclined to develop? What are the roles and jobs he/she wants for himself/herself in near future?
How this person’s skills match up against the others of the team? If there is a mismatch then is it an added advantage or potential cause for disruption at work? How well is he/she equipped to handle interpersonal conflicts? How good is he/she in responding to the ever evolving political dynamics within an organization?
How well is the person going to adapt to the organizational culture? Does this individual come from a background where he/she had greater resources at his/her disposal than is supposed to have in the organization he/she is about to enter? Is the current organizational set up helpful to see the candidate’s talent flourish?
A close observation coupled with honest analysis of the answers lead to an appropriate selection for a key position. It is an inherently difficult process, for understanding intangible qualities, traits and ever changing job roles is never easy. It is not beyond the realm of possibility though, if we only care to try a little harder, because to borrow Molière’s words,
“It is not only what we do, but also what we do not do, for which we are accountable.”
Author: Kristian Cvetkovic
(1) Inc. [http://www.inc.com/allison-fass/tony-hsieh-hiring-mistakes-cost-zappos-100-million.html]
(2) Chief Executive, December 12, 2008
(3) The New Leader’s 100-Day Action Plan, George Bradt, Jayme Check and Jorge Pedraza, 2006, Hoboken, NJ: Wiley
(4) Harvard Business School Press 1999
(5) Mail Online [http://www.dailymail.co.uk/sport/football/article-2965060/Juan-Mata-s-Manchester-United-career-looks-going-way-did-Chelsea-going-wrong-Spaniard.html]
(6) BBC Sport [http://news.bbc.co.uk/sport2/hi/motorsport/formula_one/7074737.stm]
(7) Harvard Business Review, May, 2009
(8) Muchinsky & Monahan, 1987
(9) Research Gate, University of Santiago de Compostela, Santiago de Compostela, A Coruña, Spain