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How to Avoid the Costly Mistake of Making a Bad Hire

May 9th 2017
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Even the best accounting firms are capable of making a bad hire. We’ve all seen it happen.

The candidate with the broad and impressive resume, the recruit who nailed every interview question, the final round contender with the spotless references – at first, they seemed the answer to your prayers.

But over time and with familiarity, your “future rainmaker” proved to be someone else entirely – the chronic absentee, the “team player” who won’t pull his or her weight, the emotionally erratic employee. Now, you are not only faced with the unenviable task of discharging your bad hire, but also the cost and expense of hiring someone else.

According to a new survey from global staffing firm Robert Half, a strong majority (81 percent) of small and midsized business owners said their companies have made a bad hire. The Robert Half Small and Midsize Business Hiring Survey also found that nearly half (49 percent) admitted most hiring managers underestimate the complexity of the hiring process, and 65 percent cited problems with their hiring process.

Several factors complicate hiring in smaller organizations, said Paul McDonald, senior executive director at Robert Half.

“Some firms lack dedicated recruiting staff or a human resources function altogether,” he said. “Multiple demands on a business owner’s time also can pull attention away from recruiting and cause it to fall to the last priority.”

But while making a bad hire is incredibly disruptive for any company, the stakes are even higher in the accounting profession, where the current talent shortage means the gulf between finding good candidates and the time it takes to place them can take months – an epoch in the business world.

“Hiring is difficult and complex for small-to-midsized firms across all industries, but right now, this is especially true in the accounting profession because the unemployment rate for accountants and auditors is even lower than the national average,” said Duane Sauer, CPA, vice president of Robert Half Finance & Accounting. “Companies also are looking for professionals with a broadening skill set that can be hard to find. In this environment, companies risk losing out if they are not decisive with their offers to top candidates.”

The Costs of a Bad Hire
The Robert Half survey, which polled more than 1,000 business owners and human resources managers at US firms ranging from one to 499 employees, found the costs of making a bad hire can be incredibly disruptive to smaller firms in terms of morale, performance, and what it takes to replace that employee.

Among the many negative aftershocks of making the wrong hire:

  • On average, respondents estimated 45 hours were wasted on hiring and onboarding people who ultimately did not work out.
  • More than half (53 percent) reported increased stress on the team that worked with the bad hire.
  • One in five (20 percent) cited decreased confidence in the manager’s ability to make good hiring decisions.

The research also found that while a bad hire could be identified rather quickly, correcting the mistake took longer:

  • Fifty-eight percent of small business owners said it took less than a month to realize they made a bad hiring decision; however, it took more than twice that time on average (8.8 weeks) to let the person go.
  • Nearly five more weeks passed before a replacement started working, with 68 percent of businesses putting the workload on existing staff during this time.

These challenges are compounded for accounting firms, Sauer said, because the talent shortage means they have to cast an even wider net to find capable candidates – a process that makes the already costly search more time-consuming and, inevitably, the firm itself less productive during that process.

“Compared to the past, accounting firms have to be more focused and nimble in their hiring practices, and it makes every new hire that much more important. Previously, a bad hire could be replaced quickly with a more productive current employee,” Sauer said. “Now, there isn’t that bench strength, so the bad hire places additional demands on colleagues who are left to pick up the pieces or carry the load until a replacement can be found.”

Minimizing the Risks and Costs of a Bad Hire
To avoid the fallout of a bad hire, Robert Half indicates several ways firms can address deficiencies with their hiring process and minimize risks of making a bad hire.

1. Branch out. Fifty-eight percent of survey respondents said the best new hires come from referrals, including employees, friends, recruiters, and others in their network. Go beyond posting job openings and hoping the right person will apply. Among the respondents who use recruiters, 76 percent said a recruiter was able to find a candidate they wouldn’t have found on their own.

2. Delegate. Forty-five percent of business owners noted that the most challenging hiring step is evaluating candidates based on their skills and potential fit, and 26 percent admitted it takes them too long to fill open roles. Delegating these duties to an outside resource can cut hiring timelines and save money. For example, 43 percent said working with a recruiter saved the firm time because the recruiter did most of the work, and 36 percent said they saved money by finding someone more quickly.

3. Get a guarantee. Thirty-two percent of businesses that work with recruiters said they do so for the service guarantee. Ask recruiters about their placement success rates and what they offer if a new hire doesn’t stick.

4. Bridge the gap. Only 18 percent of respondents said they brought in temporary professionals to assist with heavy workloads while replacing bad hires. The right person can lift the burden from existing staff, keep projects moving, and may be evaluated on the job for a potential full-time role.

To make the best use of a third-party recruiter, Sauer said, “Let the recruiter do the hard work and heavy lifting for you. A specialized staffing agency knows how to properly vet candidates so firms only see skilled talent.”

That agency can also take care of calling references or even perform firm culture assessment evaluations.

Also remember, Sauer added, that making a wise hiring decision is about much more than looking at candidates’ technical skills.

“Recruiters also are assessing applicants’ soft skills and fit with the firm’s culture,” he said.

However, recruiters cannot lift the entire hiring burden from you, Sauer emphasized. To ensure you find the best fit for your firm, the hiring company and manager should still be an integral part of the interview process, including soliciting buy-in from interviewers on the final candidate or candidates, before an offer is extended.

As an accounting firm leader, you may also have to think outside the box to compete in today’s recruiting climate, Sauer said.

Some of the creative compensation packages Robert Half Finance & Accounting has seen accounting firms offer in recent years have included:

  • Requiring fewer hours during busy season and only 40- to 45-hour workweeks during the remainder of the year.
  • Flexible schedules.
  • Exposing staff to more diverse engagements, including audits and tax.

“Because smaller accounting firms often are unable to compete with national and regional firms when it comes to compensation, they have to get creative to compete and attract top talent,” Sauer said.

Related article:

How Firms Can Avoid Making a Bad Hiring Decision

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