Currently I’m highly involved in shaping the recruitment process in my company. To be frank, before joining Ocado Technology I didn’t realise the importance of this process. I treated recruitment as something that stands in the way of my work. But I was wrong. Now I believe that recruitment is one of the most important things a company should be focused on.
“Work Rules!” by Laszlo Bock changed my perspective dramatically. The book is about how Google’s People Operations (it’s basically Human Resources on steroids) work and why. This book changed my view on importance of HR, especially recruitment. Let me share my arguments for why you should also care about hiring.
The High Cost of a Bad Hire
There are costs related to a bad hiring decision. Some of these costs are relatively easy to measure, like sourcing, interview time or salary that was paid during the tenure. But there are also other, hidden costs that are hard or impossible to estimate:
- Decreased morale in affected team. A low performer may negatively influence people around him/her. Subsequently firing them may cause a further nosedive in morale. Sometimes, however, it may have a positive impact – the team may be grateful that the constraint has been removed.
- Negative effect on productivity. I have experienced situations where a team member’s code quality was so poor that the rest of the team felt it necessary to replace their code. Naturally, the team then became more productive once that person had been released.
- Opportunity cost. What would it look like if we hired an “A player” instead? Where would we be?
Some organisations have tried to estimate the financial cost of a bad hire, taking into account all the above factors. $250k, £335k or even $884k are examples of their findings. It is probably different in your case, but it’s essential to realise that the costs may be higher than you think.
People are Really Key to Success
Leaders of the greatest companies speak with one voice:
- I noticed that the dynamic range between what an average person could accomplish and what the best person could accomplish was 50 or 100 to 1 – Steve Jobs
- One top-notch engineer is worth “300 times or more than the average” – Alan Eustace
- It’s not just a matter of “10 times more productive.” It’s that the “average productive” developer never hits the high notes that make great software – Joel Spolsky
- and so on…
It’s not a secret, that with a group of B or C players your chances are low to zero to really make a dent in a world. If you have a team of A players the likelihood of creating something outstanding increases. Joel Spolsky hit the nail – it’s not about productivity, the speed of delivering. It’s a matter of doing something that a B player would never think of. It’s about innovation, creative thinking and passion.
Happiness at Work
It’s not clear if happiness leads to high performance or the other way around, yet there is at least one study that claims that so called “people companies” (Fortune magazine’s “100 Best Companies to Work For”) are growing faster than the others. It has been conducted by The Boston Consulting Group and the World Federation of People Management Associations (BCG/WFPMA) and shows, that over the course of ten years (2001-2011) the share price of top 100 “people companies” outperformed S&P500 8 out of 10 times, and have beaten the index cumulatively by 99 percentage points. The study doesn’t prove that there’s a causation relationship, only correlation, yet the results are interesting.
BCG/WFPMA has also surveyed participants about their perceived capability in 22 HR topics, along with their financial results in 2011. Data has shown that there is “a positive correlation between capability and performance: companies that rated their current capabilities ‘very high’ experienced significantly greater revenue growth and higher average profit margins than those characterizing their capabilities as ‘low.’” What capability contributed the most in the accelerated growth? The most important factor was recruitment. The impact that the most capable companies achieved over the least ones was impressive: 3.5 times in revenue growth and 2 times in profit margin. It’s not something that we should be ignoring.
Last But Not Least
Personally, I want to work with great people. It’s them I can learn from. The better people around me, the faster I grow. And this isn’t true only for me. I feel great knowing that with each new employee, I have a new opportunity to develop myself. And the more I learn, the more I can teach others. You can only win having this upward spiral, can’t you?
Imagine that you work hard to hire great people. People who are continuously innovating and creating, developing themselves and others, pushing beyond the norm. I’d like to work with them. Would you?