Yes, you did read that correctly! It’s a staggering number and is probably the consequence of a hiring first and fire first philosophy.
This post is based on the findings of Dr. John Sullivan’s article “Ouch, 50% Of New Hires Fail! 6 Ugly Numbers Revealing Recruiting’s Dirty Little Secret” on ERE Media. Often called the “Michael Jordan of hiring,” his words carry a lot of weight as he’s an internationally renowned HR thought-leader from the Silicon Valley.
According to the article, the rate of failure occurs at every level from executives, managers, and hourly employees. Take a look at some sad stats below to get a better idea about what he’s talking about:
- 46% of all new hires fail within 18 months
- 50% of all hourly employees quit or get fired within their first 6 months
- Between 40% and 60% of all management new hires fail within 18 months
- Nearly 50% of all executive new hires fail within 18 months
- 1 in 5 new hires, or 19% can be declared as unequivocal success
There’s obviously something really wrong here and Dr. Sullivan picks out six different reasons that heavily contribute to hiring failure:
- No measurement of the cost of a bad hire (read more about the true cost of hiring IT talent)
- Process design that isn’t scientific
- Intuition rather than data-based decision-making
- Process updates that are hodgepodge
- Hiring failure rates and quality of hire are not even measured
- HR is not a data-driven function
Recruitment that isn’t data-driven will fail
In a data-driven world, it’s hard to imagine that there is no measurement of cost when it comes to a bad hire. Further, it’s also surprising that corporate recruitment is based on intuition or practices rather than utilizing process reengineering principles.
He even states that he’s found over 75% of decisions made during the hiring process are based on intuition. When you read that, it doesn’t sit well because without any measurement of failure, it’s impossible to clearly identify the root cause of not recruiting the right candidate.
At the moment, the hiring process is just selectively modified whenever there is a major issue, not a complete redesign from the ground up. But even a redesign can only be effective in HR if it’s a data-driven process.
So there has to be a dollar amount identified to ascertain the cost of each poor performer that has been recruited. It makes a lot of sense that recruitment is failing consistently as you can’t really know where you’re going wrong without a solid foundation in data to work with.
But it doesn’t stop there as you might also have to deal high turnover rates that are associated with the following:
- Lower job satisfaction
- Unfulfilled individual needs
- Culturally mismatched new hires
- Poor team dynamics
- Low motivation to stay at the company
All of the above can be directly attributed to intuitive hiring practices. Analyzing data can help you identify patterns like when employees are culturally mismatched with the organization.
But you only have to deal with turnover if you actually make the hire. According to Dr. Sullivan, applicants can also drop out during the recruitment process.
Without proper research, there won’t be any structured interviews that can help predict performance. This really hits the nail on the head as 66% of hiring managers later regret their recruitment decisions. Further, another 40% of newly promoted managers and executives fail within a year and a half of starting the job.
Companies have to first define hiring failure
Every job is relative to the company, the responsibilities of the position, and plenty of other variables. So HR departments need to get together to determine what a hiring failure actually means and what definition best suits the company.
Some factors that are included in this definition can be terminations, turnover, job performance, and training. Some other factors may include the time to meet minimum productivity standards, salary cost, legal issues, movement, diversity, and management satisfaction.
While it’s important to measure hiring failure rates, it’s also important to measure on the job performance of new recruits. This will help determine the quality of each new employee working within the company. So if the company goal is to improve the impact of recruiting, the measurement of performers who are above average will also become important.
Although we may have grown used to the disruption caused by high turnover rates, it doesn’t have to be this way as a simple change in philosophy can make the difference.