46% of US hires fail in the first 18 months on the job!!

Leadership IQ conducted a 3-year study of 5247 hiring managers from 312 companies as they hired over 20,000 employees.  Here's what the study disclosed:

• 46% of new hires failed in their first 18 months, i.e:
  • Were terminated
  • Left under pressure
  • Received significantly negative performance reviews
  • Received official disciplinary action
• Only 19% achieved unequivocal success
• Early failure is conclusive evidence that most of the fault was in the selection process. The cost is staggering - most companies monetize the cost of “bad hires” at a minimum of 2x salary.

But why are so many new hires failing? What are we missing?   Leadership IQ reports that “The study tracked new hires’ behaviors, performance and personality and interviewed all 5,247 hiring managers.  The top reasons for failure (and what recruiters and hiring managers were consistently missing) turn out to be lack of:

• Coachability (26%): ability to accept and implement feedback from bosses, colleagues, customers etc
• Emotional Intelligence (23%): ability to understand and manage one’s emotions, and accurately assess others’ emotions
• Motivation (17%): Sufficient drive to achieve one’s full potential and excel in the job
• Temperament(15%): Attitude and personality suited to the particular job and work environment
• Technical Competence (11%): Functional or technical skills required to do the job

And what can we do to correct the problem? I have four recommendations - It won’t be easy but it needs to be done!

1. Monetize the problem- put hard numbers to it in our own companies.
2. Measure and manage the problem as part of the corporate risk management process - consider it “operating risk."
3. Change the measurement/compensation system for recruiters and hiring managers. Stop rewarding recruiters for “selling loser candidates to hiring managers. Hold hiring managers accountable for selecting losers and not coaching/training them well enough to succeed.
4. Make sure everyone uses the best available tools for selection and candidate quality assurance:
   • Don’t just “train” people in behavioral interviewing - make everyone a “master." Develop techniques to allow interviewers to better investigate the areas most likely to be problems.
   • Consider using simulations of the work environment and more “trial marriages” for new employees.
   • Get input on candidates’ coachability, emotional IQ, ethics, reliability, effort level, etc. etc., directly from people who have managed, worked with or been customers of the candidate. Do thorough and effective reference checking before making the offer. There are new books, new techniques, new tools and new legal protections that can make getting information on the candidate “from the horse’s mouth” a lot more effective than it was a few years ago.

Clearly, Leadership IQ has pointed the way to some thing of great importance for all of our companies.  We need to heed this particular call to action NOW!

Comments

[Art D'Elia]

Doug, A very thought provoking piece - particularly in light of the financial consequences of failed hires at any level in an organization. Regarding your suggested solutions "...to correct the problem..." I would underscore the concept of including hiring/referencing as an integral part of an enterprise's risk management process. Indeed human capital management, overall, is a critical organizational activity that deserves vigilant risk management attention. An organization's human resource professionals and its enterprise risk and/or operating risk managers should be working in close partnership to mitigate/manage human capital risk - starting with its hiring activity. If an organization's risk management team is currently overlooking this dynamic, I would strongly suggest its human resources professionals take the initiative to forge such a partnership to address this critical influence on an enterprise's success. Of course, establishing a set of metrics to measure/weigh related risks and track progress in managing this risk are necessary and ongoing elements of effective risk management.