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Andrew Waxman
Andrew Waxman
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The Bad Hiring Decision Is Worse Than None At All

Managers need to make sure they make good hiring decisions, or they risk long-term damage to their entire group.

How important is it to make good hiring decisions? Particularly when it is a strategically significant hire, hardly anything is more important. The risk or downside of bad hires, however, tends to be consistently underestimated, or discounted completely. Typically firms are more focused around the risk of not hiring and of lacking the resources to enable them to meet their goals. That however can be a better situation than bringing onboard the wrong person.

So what are the risks in taking on potentially the wrong person for a new role? Firstly, the person does not know the field in which s/he is supposedly an expert. Background checks and interviews are the key controls to mitigate this risk. Today with social channels such as LinkedIn, it should be fairly straightforward to check a person's background. Yet, it is still something that firms frequently fail to adequately do. A LinkedIn profile and a resume with obvious gaps are red flags that are often missed. To avoid this, make sure before making a hiring decision your organization does the due diligence required to cross-check requirements with experience and skill set. Any issues should be flagged to address during the interview process. Automation and the use of certain analytical tools can certainly play a role in this.

Nevertheless, the risk of technical incompetence pales in comparison to the problems that can arise by hiring the behaviorally challenged. Hiring someone who is a poor fit within an organization’s culture or team can negatively impact the performance of the whole team. An overly self-promoting personality, for instance, can serve to undercut the performance and contribution of others. To protect against such hires, interviews, behavioral tests and reference checking are important tools but are hardly foolproof and attention needs to be paid to the stories they tell. Analysis of job change should lead to questions. Similarly, red flags should be raised by a candidate fussing too much about status, the size of an office, for example, or flip-flopping on whether or not to accept an offer.

Many of these red flags should be obvious to experienced managers, but often hiring managers will at times choose to hire in spite of them. Why, one might ask? In some cases, it may simply be desperation to hire and hire quickly to fill a gap in the team. Another case is the reluctance or failure of a long-term successful CEO, organization head, or even sports team coach, to pick an effective successor. Envy and jealousy are powerful motivators for negative behaviors. For instance, the CEO has an enviable record but may still be somewhat insecure about his place in history. Would another talented individual, given the same resources at his disposal, be able to match or even exceed his results?

A realistic mitigation strategy has to address these powerful realities of human behaviors that undercut business logic. Somehow, the envious must be shown that hiring or promoting the less talented will in the long run not help their own case for promotion. Psychologist Naomi Schragai, writing in the Financial Times, argues that one should aim to leverage these seemingly negative emotions for powerful positive use. View the hire of a talented colleague as a means to raising one's own and the team's performance, rather than as a negative thing. Instead of being responsible for another expensive mistake, making these changes to hiring habits and processes will help organizations improve their performance.

Andrew Waxman writes on operational risk in capital markets and financial services. Andrew is a consultant in IBM's US financial risk services and compliance group. The views expressed her are those of his own. As an operational risk manager, Andrew has worked at some of the ... View Full Bio
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