Posts Tagged ‘“a” players’

Cost of a Bad Hire

Tuesday, May 24th, 2016

snoozing exec

If you are at the C-level (or even the VP level), you are responsible for hiring, retaining, and managing an executive team, and it is important for you to know how much bad hiring can cost you.  Let’s assume that you will be an executive for 20 years, at 5 different companies (avg. 4 years each), with 6 direct reports.  That is 30 hiring / retention opportunities.  By the way, retaining a B or C player instead of making sure you have all A-players, is just as costly as bad hiring of new people.  Let’s further assume you are really good, and get it right 80% of the time (average exec actually hits about 57%).  So, with 30 reports, and a 20% error factor, you are likely to have 6 bad team members over your 20 years as a managing executive.

What will the financial impact be of those bad hires?  If you are at a $50 Million company, aiming for 10% growth, let’s say that a bad exec team member merely lowers your success rate, so you only hit 8% growth instead of 10% growth.  You aren’t getting fired for that, and probably no one else on your team is getting fired either.  But at $50 mil revenue, a 2% loss in growth is $1 million!  Granted, revenue is not EBITDA, but over 20 years, that may cost your owners $20 million in lost revenue.  That could be equal to $20 million in equity, since 5x EBITDA is often about 1x revenue.

Is this important?  After all, you would have gotten $4 mil /year in growth (vs. $5 mil), so you might have achieved $80 million in revenue / potential equity increases (vs $100 mil if you were perfect at hiring) after 20 years.  OK, fair enough.  But what if you are in fact wrong 40% of the time (closer to the average), and you tolerate 12 so-so people out of 30?  Then, the problem compounds.  Instead of missing 40% of the expected revenue increase, you might not get an increase at all if 40% of your team is missing in action, marginally effective, etc.

This example of lost growth revenue is of course just the tip of the iceberg.  In addition to lost revenue, a mediocre team could be failing you on on-time delivery, escapes, customer satisfaction, employee relations (leading to poor utilization and turnover), and a myriad of other operational problems that all cost big money.  How do we know?  These are the performance objectives we get from our clients when we develop position profiles for new executive hires!  When employers replace the poor performers, these are the costly problems they seek to fix.  You must also include time lost by you and the good performers on your team, who often waste productivity trying to get the poor performers up to speed.

In addition to the costs associated with the impact of a poor performer, there are also the actual hard costs of a bad hire:  recruiting fees, candidate travel, relocation, sign-on bonuses, severance, actual salaries paid, and the unpredictable cost of a potential lawsuit.

If you are a regular reader, you have seen our many articles on hiring the right way, to avoid these potentially costly mistakes!  Feel free to request reprints and visit our website to see our comprehensive program for smart hiring.

Oscar Winning Hiring and Oscar Winning Talent Management

Monday, February 27th, 2012

The Academy Awards honor “achievements” in all the key disciplines in movie-making, with acting, directing and writing being most notable.  Other awards, including the ones they don’t even telecast, involve the music, sound, editing, costuming, production design, makeup, and even the science and technology behind what we see on the screen.

This got me thinking of the two ways this applies to the world of hiring:  Every Oscar winner is of course an “A” player who produced outstanding results.  In a way, even all the nominees are “A” players (“It is an honor just to be nominated” is clearly true).  The vetting process is so thorough, that you can’t even get a nomination unless your peers (people in the Academy who know what you do) nominate you, and Academy members have to swear they’ve seen your work (viewed the movie) to even vote on your award.

In hiring, we hope that companies employ a similar process – with people who actually know what the candidate will be doing get to be the ones who evaluate the candidate for hire.  And, the analogy of viewing the movie is equal to the hiring manager really understanding what the candidate has done recently that merits the “award” (being hired)!  This entails digging deep to find relevant experience and skill that relates to the actual objectives of the job.

For current employees, people who have been toiling away at their craft, Oscars come in the form of incentive compensation and other merit-based rewards.  Sometimes these are based on arbitrary things, like the company’s revenue or profitability, but the best way to encourage award winning performance is to individualize it – make the incentives directly relate to the specific performance wanted from the individual.

Make your company like the Academy – rewarding talent after the hire, and finding talent by looking for prospective award winners the right way.

Evidence of Recovery in Staffing Plans

Saturday, October 10th, 2009

I’ve been writing in my company newsletter for months that I think the economic recovery will be led by a very dynamic hiring environment. Not necessarily lots of new job creation, but lots of changes and movement at the executive level. (E-mail me for a copy of my latest take on this).

Recently, other news reports and hiring experts have been echoing these thoughts. Here’s some key examples with links:

Wall Street Hiring
Google Hiring
Retailers Hiring
Hiring Guru Lou Adler on expected hiring pace in recovery (due to current dissatisfaction)
TalentRise Survey on employer expectations

The “A” players are now overworked, underpaid, and underappreciated! If all of “us” hiring experts are right, now is the time to make plans to ensure you get the people you need, before other companies grab them first.

Evidence of Recovery in Staffing Plans

Saturday, October 10th, 2009

I’ve been writing in my company newsletter for months that I think the economic recovery will be led by a very dynamic hiring environment. Not necessarily lots of new job creation, but lots of changes and movement at the executive level. (E-mail me for a copy of my latest take on this).

Recently, other news reports and hiring experts have been echoing these thoughts. Here’s some key examples with links:

Wall Street Hiring
Google Hiring
Retailers Hiring
Hiring Guru Lou Adler on expected hiring pace in recovery (due to current dissatisfaction)
TalentRise Survey on employer expectations

The “A” players are now overworked, underpaid, and underappreciated! If all of “us” hiring experts are right, now is the time to make plans to ensure you get the people you need, before other companies grab them first.

Employee Retention in Recession – Part II

Thursday, July 16th, 2009

My last post was about the importance of keeping your best people, especially in a recession. Today I’ll focus on what motivates an “A” player. These factors need to be in place in order for you to keep your top people loyal. “A” players are motivated to stay with you when they are:

  • Inspired by your vision and leadership – make sure you articulate this clearly and stay positive in your communication.
  • Impressed by your business plan – You do have one, right? A roadmap to success must be part of your plan.
  • Part of a great team tackling a great challenge – an “A” player wants to be surrounded by other high quality teammates, who are operating at optimum performance.
  • Believing in the company’s potential to succeed – would you bet on your chances? Your “A” players can calculate the odds too.
  • In a stable, secure environment – have you been making people feel safe or not so safe in your comments about today’s situation?
  • Able to make a difference, to count – because you have clearly spelled out their objectives and shown them how the achievement of those aligns with corporate goals.
  • Have the right compensation – this is last on the list, because if the factors above are present, compensation becomes less important. The “right” compensation for a key manager includes incentives for their own performance objectives.

Take care of your people, mostly through excellent communication and the right attitude, and I believe they will stay loyal and take care of you!