Dr John Sullivan Talent Management Thought Leadership
46% of new hires fail, yet hiring managers are painfully slow in firing their hiring failures.
It has happened to almost everyone involved in hiring. Immediately after a new hire in a key position starts, everyone notices they are struggling and acting quite differently than they did throughout your hiring process. It will quickly become clear to everyone that hiring this person was a major hiring failure. Despite this realization, no individual will accept the responsibility for immediately starting the termination process. This means that everyone will suffer while this failed new hire languishes in the job for weeks and even months.
No, they won’t get better – It’s a mistake to assume that a failed hire will get better as they build up their skills while working on the job. They won’t. The reason for that is that only 11% of hiring failures are caused by skill-related factors. And because they won’t get better, their immediate departure is the option with the highest ROI.
Begin By Understanding How Much A Single Failed Hire Will Cost You
I have found that few will support the quick termination of any new hire. Until everyone fully realizes the dollar value of the damage, they will do nothing as the failed hire languishes in their position. To start out, they won’t be as productive as you need. And as long as they stay, they will continuously disrupt your team. If they have a customer impact, this new hire will soon begin to negatively impact your customer service and product sales results. Finally, any training you provide them with will be lost when you eventually realize they can’t be salvaged. So, in total, I estimate that keeping a failed hire for too long can end up costing you up to two times their annual salary.
You can find a more detailed list of the costs of a bad hire here.
Part I – Proactive Actions For Encouraging Failed Hires To Leave
You can, of course, hope that your failed hire will decide to quit on their own. But instead of hoping or waiting for that to happen, the best course of action is to proactively encourage them to leave right away. This will not only minimize the business damage that they will do, but it may also help you minimize any legal issues related to termination. So here are some actions that have been proven to be effective in encouraging a failed hire to quit voluntarily.
Give them an opportunity to resign – after you have explained your concerns and negative projections for their future at your company. Many will act on your recommendation to quickly resign and restart their job search to avoid the black mark of being fired.
Show them how a quick resignation would provide them with a positive reference letter – Cisco created the first “no-fault divorce program” that encouraged underperforming new hires to leave immediately before establishing a track record of poor performance. Because that negative track record would prevent you from giving them “a positive reference letter.” So, take the time to explain to each failed new hire the value of this one-time opportunity for a positive reference. And urge them to resign immediately.
Offer them a severance package if they voluntarily leave – money is a powerful motivator. So, realize that it’s not unheard of to offer a failed hire a bonus for quickly resigning. For example, Zappos has offered new hires a $3000 bonus for quitting at the end of their onboarding process if they realize this is “not the job for them.” Amazon has successfully offered its unhappy new hires up to $5000 to voluntarily leave during their first year. So, realize that offering your failed hire an attractive severance package (up to five months’ pay) to immediately quit will likely be sufficient to get most failed hires to resign.
Transfer them to another job – if your primary problem with the new hire is that it’s now obvious that they aren’t a good fit with this team or manager. You might be able to salvage this new hire by transferring them to another job where they fit in.
Tell them you may reduce their compensation – if your failed hire is a non-exempt employee. Suggest that if they stay, you will consider reducing their work hours and overtime eligibility. And that possibility may be enough to encourage them to leave voluntarily.
Part II – For Future Hires, These Additions Will Make It Easier To Legally Fire a Failed Hire
After you’ve already hired a failed candidate, there isn’t much you can do to limit your current legal liability after you decide to fire them. However, there are some positive actions that you should take in order to limit your legal liability when you decide to fire failed hires in the future. The legal protection clauses that you should consider include:
Initially, put all new hires on probation – if you haven’t done it already. Automatically putting all new hires on probationary status will dramatically improve your ability to fire a failed new hire because new hires who are on probation are much easier to fire. In most cases, that will mean that you can safely release them with or without cause. And sometimes even without providing them with due process.
Initially, hire them on a temp-to-permanent employment contract – rather than making a new hire “a regular employee” right away. For their first 3 – 6 months, initially put all new hires on an employment contract because that will make them much easier to terminate.
Require arbitration for any employment disputes – requiring every new hire to submit all of their employment-related disputes through your corporate arbitration process. This will encourage most failed hires to quit rather than undergo the tedious corporate arbitration process.
Reserve the right to schedule an immediate performance appraisal – because having a documented record of poor performance will strengthen any new hire termination case. Reserve the right to subject new hires to immediate performance appraisals the minute you suspect you have a problem.
Part III – Proactive Recruiting Actions For Reducing Your Hiring Failures
There are some internal actions that smart recruiting leaders can take to minimize their future hiring failures. Those recommended actions include:
Require a failure analysis in order to minimize future hiring failures – because failed hires are so costly. It is essential that you proactively act to limit the number of future ones by conducting a “failure analysis” to identify the underlying root causes of each major hiring failure. Research has shown that the key causes of hiring failures are seldom a lack of skills. Instead, an inaccurate assessment of candidate motivation, attitudes, coachability, and fit. Fortunately, under data-driven recruiting, all of these are fixable.
It pays to keep second-ranked candidates warm – because the overall new-hire failure rate is so shockingly high. It makes sense to have a qualified backup ready when your new hire for a key job fails. One of the most effective ways to ensure that you have a backup is to keep your second-ranked candidate “warm” and interested. You can do this by letting them know that even though they weren’t ranked #1, there’s still a reasonable chance you may have an opportunity for them in the near future. So, ask for their permission to keep in touch. Be ready to pull the trigger fast in case your top candidate turns out to be a hiring failure.
Hire two and release the weakest one after a side-by-side trial – for some jobs, there is really no way to tell if you have selected the superior candidate until after they have actually performed in your work environment. In these cases, you should consider the “hire them both ” approach, where you hire the top two candidates. Then, after a week’s trial on the job, you release the poor-performing one.
Clearly define and track your hiring failures – unfortunately, only a handful of corporations take the time to objectively define a hiring failure. And continuously track their new-hire failure rate. Without this data, continuous improvement is unlikely. You can find a list of the objective measures that define a new-hire failure here.
Final Thoughts
Of course, it’s a common practice in every strategic business function to measure the failure rate of each of its high-impact processes. So, I can only speculate on the reason why so few talent acquisition leaders measure and report their new-hire failure rate. My informed guess is that the underlying cause for this failure is that recruiting leaders are afraid that they may find their rate to be embarrassingly high and extremely costly.
Thanks for reading
Note 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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