6 Ways to Avoid the Dreaded Bad Hire Don't let recruiting mistakes cost your bottom line.
By Brian Sutter Edited by Dan Bova
Opinions expressed by Entrepreneur contributors are their own.
Smart business owners know the best investment any company can make is hiring the right people. According to this small business report, 38 percent of small businesses in the survey have plans to hire more employees over the next year. Good employees will work hard, be your brand ambassadors, and create a culture of camaraderie for your business. On the other hand, a bad employee can be poisonous, spreading negative attitudes that can be disastrous in the way your team interacts and works. Eventually, this poor fit will negatively affect profit and growth.
Knowing what a good employee can do for you is one thing -- finding them is another. In fact, 42 percent of small business owners identified hiring new talent as their biggest challenge in 2015. Making the wrong choice can be costly, too. The Department of Labor estimates bad hires and turnover can cost a company 30 percent of its annual earnings. According to a blog post by Jorgen Sundberg, a recruiter who now runs London-based content marketing company Link Humans, the cost of turnover for a small business with less than 64 employees is around $8,000. He estimates that terminating a mid-level manager who's been with your company for 2.5 years would cost $840,000 when you factor in related costs like hiring, onboarding, compensation and severance pay.
With these kinds of numbers, it seems obvious that more time should be spent on hiring decisions, but this isn't always the case, especially if you're a small business owner juggling multiple roles -- everything from CEO, accountant, manager and recruiter -- in your company. As a result, quick decisions are often made based on immediate needs and gut reactions.
Related: 4 Tips to Hiring The Right Candidate
To prevent a bad hire from destroying your bottom line, below are six factors business owners should keep in the mind during the process.
1. Ask yourself if you really need to hire someone for this position.
When your budget is tight and desperately needed for future growth, it's worth asking whether you really need a full-time employee or if an independent contractor, freelancer or outsourced service can do the job. If someone outside of your organization can sufficiently perform the duties you need, you might want to consider trying out their services as it will save money on payroll taxes and benefits, including health insurance and paid vacations.
2. Be very specific about your needs for the position.
Before posting a job ad, business owners should determine exactly what skills they need their new hire to have. A post in the U.S. Small Business Administration suggests writing a clear job description that outlines job duties and identifies the skills needed to perform those duties.
Tip: The more detailed your outline, the better. A post in The Small Business Playbook says: "It's better to know that you are looking for "a college student to work weekends that has unlimited enthusiasm, a great attitude and has previous customer service experience' than "someone to work weekends.' Once you have created a profile for your new employee, you can use it as your guide and to avoid getting sidetracked."
3. Ask for referrals.
Do you have a referral program at your company? If not, you should consider creating one, as there's a higher likelihood employees who are recommended will be successful and happy at your company. Why? The employee who recommended them does not want to ruin their own reputation by referring someone who won't stick around. As a result, they often think carefully about the person they're recommending to their boss. Additionally, referred candidates often "get a much more honest perspective of the company," says the WSJ's guide on hiring, which means those who decide to move forward in the application process know the ins and outs of the company and position they're applying for.
4. Call the applicant.
Once you select the resumes you're interested in, consider calling the applicant to get a better sense of who they are. In just a few minutes, you can get a decent read on a person. During the call, pay close attention to their answers to your questions and also, their voice. Are they enthusiastic? Do they speak clearly and confidently? The Small Business Playbook says:
"By just asking a few questions and listening to them speak, you can get an idea if this is a person you can possibly see working for you. If they sound promising, then you can invite them for a face-to-face interview."
Related: 5 Red Flags to Watch for During Video Interviews
5. Be aware of bias hiring.
When you make a decision without really realizing the factors involved, unconscious bias is often occurring in the brain. In the workplace, it's often so subtle, you won't even realize it happening. When making hiring decisions, be aware that these subtle biases can prevent you from hiring the best people for the job. For example, one study found that specific masculine words like "competitive" and "dominant" existed in bad reviews used to describe women, but those same words were used in positive reviews to describe men.
6. Pay close attention to performance in the first few months.
After bringing in new hires, it's important that you pay close attention to their performance. Ask other employees for their feedback of new hires to determine whether they're a good fit early on. In many cases, the longer it takes to figure this out, the more it will end up costing your company. During this period, if you discover that your new hire has specific strengths, find ways where they can grow those strengths to benefit your bottom line.
For small business owners with a lot to do and not enough time to do everything, it may be tempting to hire someone quickly to help with demands. Unfortunately, quick decisions made on hires often turn problematic for companies, costing money and time small business owners don't have. If you simply can't do the legwork, consider using an employment agency or recruiter to help you find the right fit.
Always proceed with caution in hiring decisions as the right talent can help build your business. But remember -- a bad apple can destroy culture, halt growth and veer your company off track.
Related: 6 Reasons Why You Must Resist the Temptation to Hire a Brilliant Jerk
