By: Marieke Jesse
Failed hires are expensive and companies often bundle this metric into their turnover and attrition figures. By analyzing exactly why people are leaving within the first 12 months of starting their job, companies can save both time and money.
When the UK’s prime minister Liz Truss resigned from her position after 45 days in office, she was reportedly entitled to £115,000 per year for the rest of her life. And this was on top of the severance pay, prime minister’s salary and member of parliament’s salary she had already received.
Her longevity in the role became something of a joke in the UK, with The Daily Star newspaper comparing her term to the lifespan of a lettuce, tracking their performance in a series of videos. Unfortunately for Ms Truss, the lettuce won.
Joking aside, there is a more serious point to be made: failed hires are expensive for governments and companies alike.
Failed hires are important because of the vast efforts that go into recruitment – a process that is both time-consuming and costly. If individuals leave soon after joining, the company does not get much in return. And then they have to start all over again to find a replacement.
We keep hearing anecdotally that individuals are not just resigning soon after starting; some are not even showing up on their first day. This trend of ‘ghosting’ – where all contact is ceased – is no longer restricted to the world of online dating. Employers are hiring, signing a contract, and then being given the silent treatment by their no-show. This trend echoes the results of a survey by recruiter Indeed that found 83% of employers had already experienced this.
There are, however, steps that employers can take – through the use of analytics – to prevent this from happening.
Like most of our clients, Crunchr defines a failed hire as an employee who leaves the company within the first year. This needs to be looked at more closely because the reasons can vary depending on when in those 12 months they leave. A person who quits after a few weeks will likely have different motivations from someone who leaves after almost a year. For example, in the early stages of employment, the onboarding process may not fit with what was promised at the interview stage. And the individual may think it is easier to find another job if they leave quickly and while the leads from their recent job search are still warm. Also, in the current environment, it is relatively easy for job seekers to find another position.
Analytics can drill into the root causes of these problems, and there are number of metrics that can be considered. The failed hires can be broken down by location, department and team, to assess whether there is a particular issue – perhaps with a manager. Or the hiring channel could be at fault. For example, the individuals hired via advertisements on Instagram or Facebook may be more unreliable than those found through LinkedIn.
In an article for Harvard Business Review, Peter Cappelli, Professor of Management at the Wharton School, writes how businesses are doing more hiring than they have in the past, and they are doing an even worse job of it now. Part of the problem is they have been outsourcing the hiring to companies who then use subcontractors that scan platforms like LinkedIn for candidates. And their success in predicting who will be a good hire is still unknown.
Anecdotally, we are hearing that internal referrals from existing staff are often the most successful hires because they are more likely to be a cultural fit. However, the downside of this approach is that it risks creating an exclusive environment that doesn’t encourage diversity and inclusion because it isn’t open to applications from different segments of society. Kate Gautier, a graduate student at Stanford Graduate School of Business, and Lalith Munasinghe, a professor of economics at Columbia University, give advice on how to build a stronger employee referral program. This includes asking certain questions of those making the referral, such as whether they have worked with the candidate, how they know them, and how long they have known them.
Given all the effort that goes into recruiting, the issue of failed hires deserves increased attention. Often, we see that companies focus purely on recruitment and forget to look at whether those efforts have been successful. In fact, some companies have only started looking at the issue of failed hires because it is something they can explore in Crunchr. Previously, an underlying problem may have been hidden because the data on failed hires was bundled into measuring turnover and attrition. They may have had a problem with failed hires and not even realised it, because, unlike Ms Truss – it was not visible.
The sooner companies get a grip on this the better. It will make their recruitment process more effective, save time and money, and create a workforce that lasts for the long term. And hopefully longer than the lifespan of a lettuce.
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