The most common mistake business owners make – and how to fix it

Do you know the most costly error businesses make on a regular basis?

Poor hiring decisions.

Every time you “get the wrong person on the bus,” it costs about 25% of the bad hire’s base salary to correct.

And that doesn’t include the months of poor productivity, the time and effort of managers and team members – or the expense of fighting a lawsuit for wrongful dismissal.

With the economy turning around and the unemployment rate beginning to drop, how do you give yourself and your managers the best opportunity to get it right in the first place?

There are three key steps.

1.  Job descriptions.  Good job descriptions

• Do you have accurate, up-to-date job descriptions for every position in the company?
• Does each job description clearly describe not just the skills, but also the personality characteristics required for the position?
• Does each job description clearly delineate the performance criteria that will be measured in the position, using SMART goals?  And do you actually use those criteria on an ongoing basis to provide regular, consistent feedback and recommendations for how someone can improve?

2.  Testing

Yes, it’s legal to test job applicants for skills and personality characteristics, but you must only test for specific characteristics that are highly relevant to the specific job description.  Never convey acceptance or rejection of a candidate specifically due to their test results.  Testing does not guarantee success or failure.  You’re simply trying to match personalities and skills to the requirements of the position.

To be effective, the testing used must be robust, verifiable, and validated for use in hiring.  Before implementing a testing program, consult an attorney to make certain the testing program you select is appropriate for your company and industry.  And you’ll need a trained professional to help you administer and interpret the tests.

For the first selection screening, I recommend that you require all candidates to submit a resume, job application, salary expectations, and complete the test you and your legal counsel have approved.  This is the stage to cull the number of applicants stringently.  Don’t even schedule the initial interview until the applicants have met all the basic criteria you’ve established for the position.

The 16 Personality Factor (16PF), the Drake P3, and the Predictive Index (PI) are three tests that have been suggested by other Vistage Chairs and used successfully by members and clients.  You can Google these tests using those names, or go to the websites listed below.

16PF:  http://www.ipat.com/about/16pf/Pages/default.aspx

Drake P3:  http://www.predictiveperformanceintl.com/about_DrakeP3.cfm

Predictive Index:  http://www.piworldwide.com/Products/Predictive-Index-System.aspx

3.  Interviewing

Of course you’ll conduct interviews with candidates – but only after you’ve ensured that you have an accurate job description for the position and prequalified each candidate.  You need to get to the final three candidates quickly and methodically.

Just like the job description and the testing criteria, your interview process needs to be clearly defined and thoroughly thought out.

• Create a list of questions and a series of role-play scenarios that highlight the characteristics and capabilities required.
• Interview individually and in teams to evaluate the candidate’s reaction to multiple interviewees.
  • In team interviews, does he or she focus on just one, or on all of the interviewers?
  • Does he or she accurately identify the decision maker?
• Ask each candidate the same base set of questions.  If you don’t ask the same questions, you’ll never have a baseline for evaluation and comparison.
• Have your interview teams meet on the same day as the interview to deeply and honestly discuss each candidate.
• Have the hiring manager interview the final two candidates three times in different settings, highlighting different requirements.

By now, you’re probably thinking this is a time-consuming and costly process.

And yes, it does take time and effort.  And yes, the testing costs money.

But when you compare the time and up-front costs incurred to the time spent hiring, training, firing, and replacing every bad hire … you’ll quickly see that the cost is more than just reasonable.  It’s cheap.

What’s been your experience in avoiding hiring mistakes?