Hiring the right people will eventually contribute to the overall success of a business. On the other hand, a bad employee has the potential to cost you thousands of dollars.
"The single most important driver of organizational performance and individual managerial success is human capital, or talent," says Bradford Smart, president of recruiting firm Smart & Associates and author of the book, Topgrading: The Proven Hiring And Promoting Method That Turbocharges Company Performance.
In his book, Smart says that only 25 percent of hires are considered top performers, but business owners can increase that number to 90 percent by following his formula, which have been mentioned in the Wall Street Journal, CNBC, Fortune and more.
Here a few of his tips on hiring:
1. Calculate your successful hires and cost of mis-hires. Smart advises business owners to be as meticulous and calculating with new hires as they are with equipment and technology. “For a piece of equipment costing $500,000, we’re disciplined in calculating ROIs, doing comparative shopping and planning installation," he says. Companies should proceed to hire with the same caution.
To aid business owners in measuring the return on investment in employees, Smart devised four online calculators: the hiring success calculator (calculates percentage of high performers hired and promoted), the talent projection calculator (calculates the number of people you'll have to hire and fire in order to achieve a 90 percent success rate), the mis-hires calculator (calculates your typical cost of mis-hires, and your typical number of hours sweeping up after mis-hire) and the organizational cost of mis-hires (calculates how much it will cost you to replace underperformers with your current methods versus Topgrading methods).
2. Create a vivid job description. The job description in an ad determines the type of people it attracts. Hiring managers should put in the extra time to make the description as vivid as possible.
"Job descriptions are so vague that hiring managers and others who will be affected aren't really clear about what they are hiring someone to do and candidates are equally confused, hoping to figure it out once they're on the job. Avoidable, costly mis-hires are the result."
According to Smart, the staff at Smart & Associates often get job descriptions from hiring managers that are so vague, they have to call the client to clarify the duties associated with the job.
3. Recruit from your networks and have connectors. "The advantage of recruiting from your networks is that it is faster (pick up the phone, e-mail, use social media), better (because you know the people to be high performers) and cheaper than running ads or using recruiters (no fees)," says Smart.
Aside from having a network of A-players you've worked with, Smart recommends having a separate network of people called connectors. "Connectors are people who know A-players they can refer. We recommend that every manager build and maintain a list of at least A-players and 10 or more connectors—people who are not suitable for your business, but who know a lot of high-performers you might hire. This connector group can include retirees who stay in touch with lots of talented people, vendors with an eye for talent, professional associates and former peers who know lots of As."
4. Avoid generic competency questions. Smart considers the face-to-face interview to be the weakest step in the hiring process. "Competency interviews fail because a typical competency question is, 'Pat, can you give me an example of when you had a lot of passion for your work?' Of course anyone can come up with an example and anyone can claim more passion than exists."
Smart once met a senior manager at a recruiting firm who coached candidates on how to successfully oversell themselves and lie during the interview process.
For this reason, he believes the key during the competency interview is to not allow the candidate to "put [one's] best foot forward." Smart suggests asking questions that show initiative. For example, "What actions would you take in the first few weeks, should you join our organization?"
5. Have the candidate set up a reference call. This method is done using what Smart refers to as the TORC (threat of reference call), which involves asking the candidate to set up the reference call between the hiring manager and the previous employer or referral.
"This 'threat of reference check' scares C-players away," says Smart. "C-players can't get their former bosses to talk to you and C-players wouldn't want their former bosses to talk to you anyway. Decades of experience confirm that high performers do get their bosses to talk and are happy to make the arrangement." Smart advises recruiters to remind candidates throughout every step of the hiring process that they will be the ones to set up the reference call between the two parties.
Samantha Cortez writes for Business Insider, focusing on careers, growing start-ups and social media. She has written entertainment pieces for the New York Daily News and retail design features at 20/20 Magazine.