The costs of making bad executive appointments – and how to avoid them

Bad senior or executive appointments, most businesses have made them. An established firm would be hard-pressed not to have made a bad hire or two in their time; it’s almost unavoidable. The trick is to learn from that and to reduce the number you make in future. But how do you go about doing that?

The biggest error an organisation can make – especially when it comes to senior management – is choosing the wrong candidate for the role – trying to make a square peg fit a round hole. This may sound obvious but getting the candidate wrong is still a widespread problem.

According to a global survey of 6,000 HR and hiring managers carried out by Careerbuilder, 62% of UK firms admitted to having made poor appointments.

That figure may sound high, but compared to other leading industrialised nations, we’re not even all that bad. Of the ten countries with the highest GDP, the UK was only seventh in terms of making bad hires.

And what does a bad hire mean for a business? More often than not it means a fall in productivity and failure to meet financial expectations and targets. Of the UK firms surveyed 27% said a bad hire cost them £50,000 or more.

In addition to the day-to-day costs for a business, a bad appointment can also mean additional recruitment fees, the cost of getting a new candidate up to speed, compensation and dismissal costs.

Beyond the bottom line there are also intangibles to consider. What about the loss of morale, drop in productivity, or an overworked team having to pick up the slack? Have relationships with clients been damaged? May they even go elsewhere because of mistakes made by over-worked or under-performing teams?

It sounds like a dreadful situation, but there are many ways it can be avoided and firms can ensure the right people are asked to join their workforces.

The first and most significant way to avoid a poor hire is to conduct proper due diligence when appointing an executive search firm. Ask to be talked through their credentials and success rate in that particular market.

It’s also important to make sure they carry out a targeted market search on your behalf. Many firms simply work off a database of pre-existing candidates, without really listening to client requirements. Make sure you’re getting a unique service that works for you.

Here at Martin Tripp Associates we typically speak to 100-150 candidates per job. We reach out to gain market knowledge and to get a sense of whom those people rate in the context of the brief. It’s an extensive but highly effective process.

Any serious search firm should also be pre-referencing any potential candidates. We will undertake discrete pre-screening. We’ll speak to the relevant people and get a measure of whether someone added value and was a key performer at their organisation.

Then, when it comes to meeting the candidate, make sure you really get to know the person sitting in front of you. Listening is the most important skill. What drives them? What gets them out of bed in the morning? What makes them tick? Stack up their goals and ambitions, in the context of the role. If something doesn’t quite make sense, find out why. Only by paying close attention to what your candidates say will you get a good picture of who they really are.