8 ms·
"How costly? The U.S. Department of Labor currently estimates that the average cost of a bad hiring decision can equal 30% of the individual’s first-year potent
by mathattack 13y ago
"How costly? The U.S. Department of Labor currently estimates that the average cost of a bad hiring decision can equal 30% of the individual’s first-year potential earnings. That means a single bad hire with an annual income of $50,000 can equal a potential $15,000 loss for the employer."
I think this dramatically understates the cost. What's the cost when 3 people quit because you hired a PM that threw them under the bus in front of a client? What's the cost when 2 women quit because they were sexually harassed? What's the cost when an employee defrauds a client?
The cost of a hiring mistake is not a fraction of a years compensation, it's many multiples of a years compensation. This is one reason many places let slightly sub-par people stay.
- r_m_adler 13y agosorry the last sentence seems to be a non-sequitur. Why does the high cost of a hiring mistake justify letting slightly sub-par people stay?
- eigenvector 13y agoBecause they might be replaced with someone who is much, much worse. Not awesome vs. complete disaster.
- astral303 13y agoPresumably because of the risk of replacing a known slightly sub-par quantity with an unknown truly bad hire.
- GeneralMayhem 13y agoVery risk-averse people might prefer a known meh to an unknown potential apocalypse.
- mathattack 13y agoYou answered it much better than me. Every hire that comes in without someone at the firm personally vouching for their character is a risk. Sometimes an honest meh is better than risking the apocalypse.
- matwood 13y agoKnown quantity versus unknown.
- benjohnson 13y agoThis has been my experience - one unethical employee ran off with our best customer that represented about 40% of the business. I now value ethics above all else in working relationships. Two ways I perhaps can quickly determine ethics: Watch how they interact with people in low status positions (food servers, gas attendants) versus how they interact with you. Also ask them about how they determine morality - if they give you a blank stare then perhaps take that into consideration.
- nightski 13y agoJust a note: If you value morality and ethics so dearly then make sure that the company is aligned with these expectations. All too often a company looks for moral employees while it will screw them over when it is convenient. Because hey, it's business right?
- mathattack 13y agoIt can be worse... Companies can hire moral workers because they won't steal secrets after they've been screwed over. But such is life. If morality were 100% cost-effective then it wouldn't really be morality, it would be business.
- vonmoltke 13y agoI think this dramatically understates the cost. What's the cost when 3 people quit because you hired a PM that threw them under the bus in front of a client? What's the cost when 2 women quit because they were sexually harassed? What's the cost when an employee defrauds a client? When did someone who runs off co-workers or gets the company in legal trouble become the "average" bad hire? In fact, when did this become a common occurrence for recently-hired people? Everyone I know of in 11 years or professional experience who fits this category were long-time employees of the company before these issues arose.
- mathattack 13y agoThe truly bad sometimes find ways of covering their tracks. I've seen bad newbies, and bad oldies. Even the "average" bad hire costs a lot more than what the article suggests. $15K for a $50K job seems very low. What's the value of the "average" bad hire turning a client reference into an angry client? Or having them hire someone very bad for one of their positions? Or undermining company morale?
- vonmoltke 13y agoWhat is the probability of an "average" bad hire doing those things? That was at the core of my original point. This seems to come up on HN every time a hiring discussion moves into talking about "bad" hires. People bring up realistic negative possibilities without attaching a probability to them, making it impossible to determine a ballpark expected value, or in this case cost, of the action. Now, for various reasons calculating an accurate probability is virtually impossible as well, but one should be able to come up with a rough idea of what it is. Additionally, every company should have some sort of controls in place to minimize the damage a new hire could do, even if the action is a genuine mistake or intentionally malicious.
- mathattack 13y agoGood question. Some of it is quibbling on words. My general take on people's ability is it's a fat tailed distribution on both sides. There's a middle that is fairly tight in ability, and they perform good or bad largely dependent on the circumstances system (including management) that they're put in. The upside and downside surprises can go very far on both sides of the mean. Which means slightly bad hires tend to be products of a bad system, which is what should be fixed. But very bad hires can do an inordinate amount of damage even relative to their small probability. P(x) * Value(x) comes out to a very large negative #. (Similarly P(x) * Value(x) comes out to a very high absolute # for the great hires) Now what's the probability of a truly awful hire? Depends on how well you hire. I suspect it's somewhere between 1% and 10% based on the organization. Same on the upside.
- jstelly 13y agoI totally agree that this dramatically underestimates the cost of a bad hire. It's more accurate for a hire not hitting expected performance, but in my experience a bad hire has a much more extreme worst case. This is especially true in programming because the effect of an individual's decisions gets amplified by large numbers in many cases (the number of internal and external customers downstream of these decisions).