March 22, 2011 Leave a comment
Why isn’t the proper attention given to the hiring process? I think it has to do with the time value of time. I know most of you are familiar with the “time value of money” concept. For those of you who aren’t, the basic idea is that a dollar in the future has less value than a dollar today. This is due to the affect of inflation. So if inflation is 5%, the dollar you’ll be receiving next year will only have 95% of the purchasing power of a dollar you have today. That’s why you need interest on your money at least equal to the rate of inflation to stay even. High inflation worsens the situation. For most of us, future time is far less valuable than current time. If you’re working really hard, or behind on an important project, an hour or two today is more precious than gold. Squeezing an hour into a day already filled is impossible. But next week or next month or next year… well, that’s a different story. We all have plenty of future time. We’ll waste this without thinking twice. Remember that two-day offsite workshop you booked six months ago, the one that’s coming up next week? At the time, it seemed like a pretty good idea. But now, with two killer projects behind schedule and everything else that’s running late, delaying it or forfeiting the $2,000 doesn’t seem like such a bad idea. Making the money to time conversion, the “time value of time” concept says that an hour in the future has less value than an hour today.
So for hiring, how much is a future hour worth? Most managers complain that they don’t have enough time to devote to hiring. As a result, they resist spending 20-30 minutes talking to a recruiter to define the work, won’t go out of their way to meet a hot candidate, reluctantly conduct a series of superficial interviews, and hire the first candidate who is personable, communicates well, on time, well-prepared, and who makes a good first impression. How much time is spent every week managing people who shouldn’t have been hired in the first place? My guess is that every bad hire costs the hiring manager at least three or four hours per week in extra supervision and lost productivity. The negative impact on others in the department is probably another three or four hours per week. It could be worse, but let’s use this to make the present vs. future time value comparison. A bad hire costs the manager and the department at least 24 lost hours every month. To prevent this bad hire would have taken a one-time investment of four to six hours in total time, spread across a few weeks. This involves writing a better job description, working with the recruiter, and conducting more thorough interviews. Under these assumptions the cost of time is equivalent to a 400% inflation rate per month (24/6), or 4800% per year! In other words, managers consider future time essentially valueless when it comes to hiring. This is the real cost of bad hiring — the loss of invaluable time.
Past bad hiring decisions prevent current good hiring decisions because managers don’t have enough time to do it right. You might want to work this analysis through with a few of your hiring managers to get their attention. Breaking this cycle is the first step to making better hiring decisions. Many years ago I heard this quote. It does a great job of summarizing this time value tradeoff: “Hire smart, or manage tough.” It was attributed to Red Scott, a well-known speaker, trainer, and corporate executive. His contention was that most managers “hire dumb.” They take shortcuts, use too much gut feel, don’t know the job, over talk, and under listen. This is a recipe for disaster. You can never atone for a bad hire. There just isn’t enough time. The trade-off is pushing people who don’t want to be pushed, more time involved in solving problems that don’t need to exist, lost productivity, more coaching, more training, more negotiating, more aggravation, less team work, and so on. The consequences of bad hiring decisions are faced every day with lost efficiency and extra time devoted to getting it right. Ask your managers if they’d have more time if they had better people.