Dr John Sullivan Talent Management Thought Leadership
You won’t hire a number 2 candidate for a critical job after you discover the high cost of settling. The definition of “settling” includes “accepting less than the best.” To me, that doesn’t sound like a desirable recruiting result. Until now, after losing your number one candidate, you most likely thought that offering the job to your second-ranked candidate (or lower) was the natural thing to do.
But most won’t likely continue that practice after they learn about the staggering performance drop-off that occurs when you “settle” on your number 2 (or worse) candidate.
The two best alternatives to settling are those that produce superior results. They include reopening the search, or even better, redoubling your efforts to get your #1 candidate to accept (action steps can be found here).
So the remainder of this article is a list of the tremendous recruiting and business costs that you’ll likely pay whenever you choose to “settle” on an inferior (lower-ranked) candidate for a critical job.
With The Shortage Of AI Talent, Is It OK To Settle On A Lower-Ranked Finalist?
Absolutely not! Why? Because a technology as complex as AI requires a team effort in order to succeed. However, when you hire a candidate who is ranked below number one, you will be hiring someone with fewer qualifications and fewer skills. Having widely disparate skills among your teammates will make it extremely difficult to share work, fill in, and maintain team cohesion. Also, realize that the lower-ranked candidates will likely work at a slower pace. When hired, it will likely slow the team’s pace until it matches your slow new hire’s pace.
Finally, because each one of the lower-ranked finalists probably won’t have strong collaboration skills. Some on the team won’t continually collaborate (the driving factor behind innovation). That lack of collaboration will put an end to all of the team’s innovation. Therefore, in a critical hiring area like AI, it is important to realize that in most cases, you simply can’t afford to hire a number two (or lower) candidate because of the damage they would do to your AI effort.
A List – The Negative Consequences of Hiring Lower-Ranked Candidates
The top corporations prioritize their jobs. Their leaders have realized that in mission-critical jobs (like AI, product development, branding, and data security), they simply can’t afford the high costs of filling critical positions with a candidate who is either a mediocre performer or who has a single flaw (like not being a good fit). As a result, for these high-priority jobs, you must restrict your hiring managers from settling for a second-choice candidate. The remainder of this section highlights the top 10 costs that you can experience as a result of settling on a lower-ranked candidate in a critical job. Note: the most costly business impacts appear early in this list.
- Because of their lower capabilities, hiring a lower-ranked candidate will cause your team to flounder – almost by definition. In most jobs, the #1 candidate will have greater capabilities than the second-ranked one. I have found that in mission-critical jobs, the difference in capabilities often reaches 25%. And this large difference in capabilities will allow the #1 candidate to do up to 25% more things after they get the job. Of course, the lower capabilities of the #2 candidate will, in turn, lower the capabilities of their entire team. Incidentally, when you are hiring for a critical job that also covers advanced technology (AI), revenue generation, and product innovation, you can expect a much wider gap in the top candidate’s capabilities. So, I have found that the capability drops when a #2-ranked candidate is hired for a critical technology or sales job, reaching up to 50%.
- Expect a significant drop in on-the-job performance when you hire lower-ranked candidates – one of the primary reasons for hiring the top candidate is that you need a bump in team performance. But it’s also true that the on-the-job performance differential between a first- and second-ranked candidate will vary by job. And for most professional jobs, I estimate that the performance drop for a second-ranked candidate will be only 20%. However, in revenue-generating jobs, you should expect a performance drop of 40%. In jobs that have an impact on the company’s strategic goals (like AI, quantum computing, and data security), you can expect the performance differential to reach up to 75%. Finally, in addition to their performance drop, you should realize that your lower-ranked candidates are likely to make many more serious errors on the job.
- A lower-ranked candidate will be much more likely to become a hiring failure – because they have fewer qualifications, capabilities, and more flaws. When you hire a second-ranked candidate, you must realize they are much more likely to become a hiring failure. They may need to be replaced not only because of lower performance but also because of their flaws and lack of team fit. Their lower performance level will cost you, and their eventual departure will create the added expense of recruiting a replacement. Finally, the position vacancy itself will cost the team in lost productivity. A position that remains vacant during the long recruiting period won’t contribute to the team’s results. On the other hand, it’s also important to note that the #1 candidate is almost always fully qualified and lacking in flaws. There is almost no chance that any of your #1 candidates will later become a problem or a toxic employee.
- The number 2 candidate will take longer to get up to speed – because lower-ranked candidates have fewer qualifications and less training. After they are hired, your lower-ranked candidates will take much longer to get up to speed. And in some cases, it may take several extra months for them to reach their minimum productivity level. And that delay in getting up to speed will definitely slow their home team’s progress.
- A lower-ranked candidate won’t improve team learning – another costly differential between the two levels of candidates is their learning. It’s true that top candidates are almost always continuous self-directed learners. And because of that learning, they bring significant knowledge of best practices, workarounds, and upcoming issues. Where, almost invariably, the second-choice candidates won’t excel at learning. So when they are hired, the rest of the team won’t have much of a chance to learn directly from them. Of course, your lower-ranked candidates won’t likely serve as a learning role model for others on the team.
- Most second-ranked candidates will lack leadership potential – in many cases, leadership potential and the promotability of the new hire will be key differentiators between the top and the second-ranked candidates. So you must assume that failing to hire the top candidate will likely result in a reduced number of future leaders for the team. If you do end up hiring a second-choice candidate and want them to become a leader, realize up front that a great deal of time and money will be required to invest in them. And they may take up to a year longer to develop into a leader.
- A second-ranked hire won’t attract other stars – when you are hiring truly exceptional #1 candidates that are well known throughout the industry. Their presence will help you attract other top talent to your team and company. Either on their own by applying, or through employee referrals. Unfortunately, when new candidates meet your recent week hires during your interview process. The unintended consequences may be that their lack of skills and their inability to impress may actually scare some top candidates away.
- A lower-ranked hire will take up a lot of their manager’s time – because #2 and below candidates will have fewer qualifications and skills. After they are hired, they will likely require a significant amount of additional training, coaching, and a great deal of the manager’s time. In direct contrast, a #1 level candidate will likely be able to work independently and may actually be able to help support their manager.
- The “first loser” label may affect the performance of your lower-ranked candidates – it’s unfortunately true that after they are hired. Some colleagues will label a second-ranked candidate as a “first loser.” And if this damaging label is widely applied. Some colleagues may poke fun at them, while others will simply fail to treat them with respect. Unfortunately, this public labeling may contribute to the anxiety and the poor performance of your second-ranked new hire.
- Your second-ranked candidate may become unhappy if they find out they weren’t the 1st choice – in the cases where the #2 candidate learns that they weren’t the original first choice. This knowledge, when they are a candidate, may cause them to resist your job offer. And after they are hired. Knowing they weren’t first will likely lower their motivation, and it may even lead them to quit in frustration.
An Illustration – Of The Actual Dollar Costs From Settling On A Second-Ranked Candidate
Over the years, I have discovered that the best way to overcome a hiring manager’s willingness to settle on a second-ranked candidate is to show them the actual damage they can do, quantified in dollars. The best way to create those estimates is to work in collaboration with the CFO’s office. First, because that office specializes in estimating costs, and second, because the estimates they help develop are simply more credible. An alternative way to show the dollar impacts is to focus on sales jobs (because their results are already quantified).
Start by determining the historical percentage difference between the sales results produced by former #1 candidates. And the sales results produced by former #2 candidates. In this sales case, the performance difference was 20%. And because your former second choice candidates have produced, on average $500,000 in sales each year. A 20% increase in sales for a #1 candidate would mean a whopping $100,000 gain each year. Over 10 salesperson hires, that’s over $1 million each year, which could be unequivocally attributed to hiring only top-ranked candidates.
Closing Thoughts
In order to place this “settling practice” in context. Settling is an offshoot of the “butts in chairs” attitude that drives many managers. Under this BIB approach, hiring managers expect every one of their positions to be continually filled. Based on the premise that it’s better to have a bad employee than none at all.
I have found that most hiring managers still hold that perspective. Primarily, because they haven’t been made aware of the quantified costs that result after you hire lower-ranked candidates. So the key to getting them to reduce their settling is to simply make them fully aware of the many costs outlined in this article.
In fact, I have found that simply making a hiring manager aware that “the cost of settling for a number two in a mission-critical position is often equal to an entire year’s salary for that position” is often sufficient to change their perspective.
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Notes for the reader
This is the latest article from Dr. Sullivan, who was called “the Michael Jordan of Hiring” by Fast Company.
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