We’ve all been there. You’ve been trying to hire for weeks. You know the candidate you just met isn’t quite right, but they’ll get the job done, just about, with a bit of training. Sure, they might rub a few people the wrong way in the meantime, but that’s a risk you’ll have to take. There are features to deliver, and you can’t keep making the perfect the enemy of the good. Let’s just offer them the job and get it over with.
That’s exactly the kind of scenario that can lead to a bad tech hire. But the hidden costs of doing so can be far greater than you think.
The first question to ask yourself if you find yourself about to hire someone out of interview fatigue is: do I want to be doing this all again in three months’ time? If there is any doubt in your mind, for example, over whether or not the candidate will pass their probation, it’s better to pass and keep looking, rather than close the entire interview process down and risk having to re-start it all over again with a fresh pipeline of candidates.
As we’ll see, every interview process comes with costs, and re-hiring after a bad tech hire multiplies these costs.
We’ll show you how to build an interview process that is optimized to get hiring right the first time, and avoid the hidden costs of making a bad tech hire.
What are the hidden costs of a bad tech hire?
There are all sorts of hidden costs involved in making a bad tech hire.
Time
Whether you’re an internal recruiter or an engineering manager, your time is valuable, and in all likelihood quite stretched. That can put you in a mindset of wanting jobs off your to-do list as fast as possible, and to get someone, anyone, through the door.
But making a bad hire will only cost you more time in the long run. SmartRecruiters analyzed 90 million job applications for 1.5 million jobs in 95 countries last year and found that tech roles took, on average, 48 days to hire.
So don’t rush. Get it wrong, and you could be adding close to two months of extra work onto your plate, just to get back to where you started.
Money
Recruitment comes with costs. That can take the form of agency fees, but given the costs involved in making a bad hire, using the right agency could actually turn out to be a money-saver.
That’s because of the other recruitment costs. Firstly, there’s the amount of money interviewers are being paid to interview candidates.
Consider an interview process that starts with a half-hour phone screen with Talent Acquisition, followed by two one-hour interviews, each including a pair of interviewers (for example, a pair programming exercise with two engineers, and a team fit interview with the hiring manager and a PM). Every single candidate that goes through this interview process costs the business 4.5 man-hours in time spent interviewing, half a working day. Interviewing 10 candidates implies an entire week’s worth of wages spent on interviewing.
That’s not to mention the money you might spend on a contractor to cover the role in the interim for a critical position, any money you spend advertising the role, or other expenses. Narrowing down your funnel to ensure that you only spend time on the most promising candidates for each position is essential to keep your costs down.
An experienced, knowledgeable recruitment agency working either on a retainer to build your interview process from scratch or on a contingency basis (where you only pay once they’ve filled the position) can really help to keep these costs down.
Knowledge
If you make a bad hire, you may not notice straight away. Whoever you hire will likely need some time to learn the ropes and adjust to their new working environment. Throughout this period, you and your team will be spending yet more time upskilling and educating them.
If, after two months, you realize it isn’t working out, that time is wasted, and you’ll have to start over.
Moreover, there is a level of company risk involved. During that time, you may well have imparted valuable, competitive insight to the candidate. There is only a limited amount you can do to prevent them from taking that knowledge elsewhere, perhaps to one of your competitors.
Morale
Finally, there is the impact on the team’s morale. This takes two forms as far as your team is concerned, but there is also a cost in terms of the hire’s morale too.
Firstly, a bad hire on a culture fit level can really drag the team down. High-performing organizations typically employ a "no jerk" policy, which recognizes that however talented someone is, it is never worth having someone that is pulling in a different direction from the rest of the team.
There is also the impact on the team of being told "Sorry, the dev we just hired wasn’t up to it, so it’s back to the drawing board." Interviewing can be a grueling task for a team whose resources are already stretched (that’s why you’re hiring, right?), so having to do the whole thing over again could seriously impact morale.
Letting a bad hire go quickly is also likely to leave a sour taste in the hire’s mouth. They might take to sites like Glassdoor to write a negative review, meaning there is also a risk of reputational damage in making a bad hire.
How much does a bad tech hire cost?
So when you tally all that up, and try to quantify it, how much could a bad tech hire cost your business?
One of the most comprehensive attempts to answer that question was conducted by economics consultancy Oxford Economics in 2014. Given the study is over ten years old, bear in mind that these numbers will be significantly higher today given the amount of inflation that has occurred since.
But the study found that losing an employee cost companies in the tech sector over £30,000 on average. That includes £6,455 in logistics (advertising the role and the lost costs of interviewing time) and £4,000 in temporary workers to cover the work in the interim.
Oxford Economics’ estimate is relatively conservative. The Recruitment & Employment Confederation estimates that a bad middle management hire can cost £132,000. The US Department of Labor estimates the cost of a bad hire at 30 percent of annual salary, with that number rising to 50 percent for managerial roles.
Clearly, a short, efficient interview process is key to keeping these costs down as much as possible, but ensuring that you get the hire right the first time is just as important. After all, the costs of interviewing double if you have to do it all again a few weeks after making a bad hire.
How to avoid a bad tech hire
Fortunately, you don’t have to find yourself stuck between the rock of endless rounds of interviews and the hard place of settling for a bad hire. Following these steps can help you quickly and effectively identify the best candidates:
Define the role and responsibilities clearly up front
Be clear in your own mind, and your wider team, what the person you’re hiring is there to do. Identify which skills and abilities they need to be able to demonstrate before starting, and which you’d be comfortable with them learning on the job.
Design an interview process that involves a wide range of perspectives
Ensure that your candidates meet with as many stakeholders as possible, including engineers, product managers, and potential peers, so that you can build a well-rounded picture of every candidate you meet.
Use practical, relevant technical assessments
It’s important to test your candidates’ technical abilities, but don’t just set a generic coding task for the sake of it. Real-world coding challenges or pair programming exercises, especially in a discursive, conversational format, can replicate the kind of work your hire will eventually do in the job and give you an insight into how they work both as an individual and as part of a team.
Identify the key soft skills
Be careful not to be too prescriptive when assessing cultural alignment and team fit. The objective isn’t to hire carbon copies of everyone already in the team, but to identify candidates with the right passion for your company’s mission and the character traits to quickly learn any new skills they’ll need.
Add some objectivity
Unless you’re going to assess every candidate by test scores alone, there will always be some level of subjectivity when interviewing. But try to work a level of objectivity into every phase of the interview process, even in interviews aimed at soft skills or team fit. Have interviewers give a score, say on a scale of 1 to 5, and relay the reasons why they gave the interviewee any given score. Upskilling your interviewing team is a very valuable exercise here.
Partnering with an experienced, trusted recruitment partner like Oho Group can set you well on your way. Our consultants can advise and inform on your interview process to ensure that it is as efficient and effective as possible, as well as pre-screening all candidates so that you only spend your valuable interview time on those who fit your company’s goals and technical requirements.
