What to Do When You Realize You Made a Bad Hire

January 16, 2016, 6:30 PM UTC
Photograph by Brian J. Smeets

The Leadership Insider network is an online community where the most thoughtful and influential people in business contribute answers to timely questions about careers and leadership. Today’s answer to the question: What’s the best way to keep your company successful? is written by Sheeroy Desai, CEO of Gild.

All businesses go through the typical “growing pains” no matter what size the company. Your business is developing, your customer base is thriving, your product’s popularity is rising — everything seems to be doing well. But there are two big problems that can grind that burst of positive development to a halt: not enough talent and too much demand.

In order to keep up with the demand, you’re ultimately going to need to hire more employees. At the same time, the competition for talent has never been fiercer. There is incredible pressure for companies today to hire as many people as they can, as quickly as they can in order to lock down prospects before anyone else gets to them first. Here are three ways businesses can continue momentum through smart scaling:

Understand the real cost of bad hires
Many of us know, theoretically, that making bad hiring decisions will ultimately set the company back. Simply put, a bad hire (someone who lacks the skills or drive to get the job done, or is not a fit with your culture) won’t move you forward and in fact, may move you backward. But most companies underestimate the impact a bad hire has on their business. Data shows that the average cost of a bad hire can often be five times that person’s annual salary. That’s a much needed reality check.

See also: The One Thing a Company Should Never Stop Doing

But in the midst of a company growth spurt when the pressure is on, it’s easy to default to making the first hire instead of the right hire. The problem with that approach is that bad hires almost never end up having zero impact — they have negative impact instead. Most managers think that if they hire quickly then they’ve plugged a hole, because someone’s better than no one, right? Wrong.

Here’s what really happens:

  • It takes you six months to truly figure out that the person is a bad hire.
  • You start some type of formal process to coach or manage that person to improve his or her performance, which goes on for another three months.
  • Finally, you fire the person and start the process of replacing them. That probably takes another three months.
  • You’ve wasted a whole year.

But that’s not all. Throughout the process, you, as a manager, had to spend your precious time coaching and managing someone who was having zero impact on your business instead of coaching some of the true superstars on your team.

Hire ahead of the curve
Take an honest look at your business’ trajectory and pipeline to figure out what employees you’ll need and when you’ll need them. This will give you a more detailed understanding of exactly what you need in a new hire. Talent acquisition has fallen leagues behind other industries in terms of using new technology and data effectively. Similar to how Salesforce has made salespeople “customer-centric,” hiring needs to get “candidate-centric.” Stop hiring reactively and start hiring proactively — it could end up saving your business.

Hire for growth
If you want to grow successfully, you’re going to have to hire deliberately. Simply hiring someone because they “can do the job” isn’t good enough. With the technology available today, we can get more information about candidates than ever before — data about their past roles, samples of their work, snapshots of their character, etc. Companies have no excuse for failing to invest in their hiring. It is the single most determinant factor of their ultimate business success (or lack thereof). This means investing in hiring processes, interview training, and strong collaboration between all team members involved in the hiring process. It means doing your homework outside of the interview process. Today, the Internet allows us to learn so much about a person before you even meet them. You need to invest in tools and resources to make sure you are finding, engaging, and ultimately, hiring the people you really want working for you, not just waiting around for whoever happens to fall into your lap.

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