It's Crazy How Much Money a Startup Can Waste on Bad Hires

Posted by Randy Frisch

Recently I was sitting with our Director of Finance to review year-end T4 tax paperwork for our team. I always find this is a good required exercise for any entrepreneur, as it forces me to look back on the year that was—who we hired, who we fired and what we paid out collectively across our human capital expenses. This year’s look back was a bit of an eye opener for me as we’ve scaled our team to handle growth.

There’s no question we’ve built a kick-ass team who I love coming to work with every day. Still, I was amazed at how much money we wasted on "Bad Hires" getting there. I’m not saying these hires were bad at what they do—they were all talented, qualified people. But hiring for and working at a startup is a different beast than your traditional 9-5 and it can be hard to determine whether someone will truly fit in (even if they think they have the right mindset).

First, I’ll define what I mean by a Bad Hire.

 

What’s not a Bad Hire:

If you hire someone who adds a ton of value and gets snagged/lured into another company six to 12 months later, that’s not a Bad Hire. That’s a whole other issue that needs consideration around what you need to do to retain your staff (but we’ll save that for another post).

A Bad Hire is:

When you think you’ve made the right hire out of the gate, but shortly after that doubt of fit starts to enter your head. You get this uncomfortable feeling when you see that hire stroll in first thing in the morning or as they say goodbye at what you may not deem a legitimate end of the day. They get under your skin even though they haven’t done anything "bad" quite yet. This isn’t much different than buyer’s remorse after you purchase that new car or TV. These people may be talented, but simply don’t mesh and likely think, along with you, that they’re a much better fit for a different company.

 

Let me open up and share some stats with you from 2013:

  • We added 19 new members to our team
  • Six of those hires I would deem Bad Hires (none of which are still with us today)
  • The six Bad Hires stayed with us a median of 52 days (average was 75, skewed by one we waited way too long to fire)
  • Fully loaded salary paid to the 6 Bad Hires during their stay: $70,000
  • Dollars and time wasted by our 25 rockstar team members: priceless

Let’s start with the lost money: $70,000. Whether you’re a big business or startup like us, that’s a lot of cash burned on people who added little to no value to your goals. It kills me to think of all the ways we could have better spent those dollars: people, marketing campaigns, and better incentives for our true rockstars.

Don’t get me wrong—no one is going to get hiring perfect. But there is always room for improvement by looking at your mistakes and adjusting for 2014 and beyond. It is easy to blame the Bad Hires for misrepresenting themselves during the interview stage, and believe me, some of them in our case deserve some blame. But ultimately it also falls heavily on me to go with my gut during the interview process.

HR is one of the many hats I wear at Uberflip. I’m involved in many of our hires outside of our hardcore developers. Part of this is tied to being a lean startup where we need people on our team going beyond their role – mine being COO. But truth is that even if we double from our current team size of 25 tomorrow, I’d likely still be involved in our recruitment process. This is because the makeup of our team is so important to hitting our lofty goals. It is not the efforts of our leadership team alone that has gotten us to where we are today – it’s the collective team of support, sales, marketing, billing and product Uberflip-ers.

 

So how can I better avoid more Bad Hires?

Here are a couple of my key takeaways from experiences in the last year:

  • There’s no such thing as “I’m looking for a role where I can settle in." The person who has a resume that jumps every six months is not just looking for the right fit; they simply don’t fit in anywhere. Don’t assume your company will be their saviour.
  • The candidate who tells you the one hour commute is not going to be an issue is often just excited about the role, ignoring the reality. Only hire these people if they have done the commute before. The honeymoon period sitting on the train or car doesn’t last long.
  • Avoid square pegs and round holes—culture is a huge priority for us, yet too often I looked at accomplishments on a resume over and above cultural fit. A top performer in company A can easily be a Bad Hire in your environment. Do not underestimate the importance of fitting in with your surroundings.

But here’s the one that is most important and I’m sure you can all relate to:

Listen to your gut during interviews. I can think of something that did not feel right during the interview process with almost every one of our six Bad Hires. It can be their lack of initiative, poor follow up or just a bad vibe. I’m not saying to look for Mr. or Miss Perfect every time, but dig in on the quirks and try to determine if they’ll lead to a bad fit. Too often I tried to overlook that eerie signal in favour of the positives.

I’m not going to name names in this as that would not be fair, but one of our Bad Hires failed on three of the following items which are usually a make or break for me:

1. They did not include a personalized cover letter with their resume when applying

2. They did not create a trial account of our product before the first interview

3. They did not send a follow up email after the first interview

You’re likely reading the above and wondering: what in the world were you thinking when you made an offer here? You’re right, but the candidate’s resume and past experience seemed so perfect for what we needed. How could I resist?

I actually challenged that candidate during the interview as to why the above did not happen and it motivated them to adjust with the spark I was looking for. But that’s not how an interview should go, and in most cases you won’t have them time to push the hire every day when they start with you.

Another key takeaway from the numbers was a median of 52 days until we parted ways with each Bad Hire. In some cases, the hire recognized the need to break up first. I won’t be the first person to recommend "firing fast," but this is because it’s so true. Again, we’re not going to bat a thousand on our hires, but had we had the same number of strikeouts and called it after an average of four weeks our cost would have dropped from $70,000 to $38,000. I’m confident that in most cases you know three to four weeks in if it’s working. Don’t delay; it’s unfair to both sides.

Most importantly we would have saved the time of our staff who may have been just as frustrated as me. And obviously we would have been looking for the right fit all that sooner.

So why did I share this with you? It’s not to make our Bad Hires feel bad—many of them were talented and it simply wasn’t a fit. It’s not a desperate call for help from recruiters (in fact if any of you call me I’ll politely hang up on you). And it’s definitely not to make it seem like we’re a tough or crummy place to work; pretty sure our Instagram feed would show otherwise.

No, I shared this because I’m challenging you, like I’m challenging myself, to hire better. Make sure you or your management team will jive with new hires from the get go.

Here’s a great post on how some managers will share their quirks with team members to ensure managed expectations. I still believe it’s important to hire fast, but make the most of every meeting and don’t sacrifice on your must-haves. One of the things I’ve started to do is make one of the interviews over lunch to see the true side of the candidate. And most importantly, get team buy-in. I often ask other people from our team to meet with candidates to ensure a fit.

2014 is looking to be another big year of growth for our team so I hope to have less regrets when I review T4s next February using my new guidelines.

This article originally appeared on Uberflip's blog on February 10, 2014.

Company:
Uberflip
Website:
http://www.uberflip.com
Location:
Toronto, Ontario, Canada

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Randy Frisch

Randy Frisch

As COO of Uberflip, Randy runs around daily between strategy, operations, sales and execution of Uberflip's awesomeness. Randy brings an entrepreneurial and customer-focused background to Uberflip with leadership experience in both B2B & B2C operations. Randy holds an MBA from the Schulich School of Business and a Bachelor of Commerce from McGill University. more



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