The cost of mis-hires at emerging SaaS companies is astonishing. (hint: millions!)
What’s even more surprising is how little time and attention is generally spent on fixing the issue.
Now, truth be told, I think most CEOs don’t spend enough time on it because they are not fully aware of the enormous impact that mis hires have on their business.
Here’s a look at the data and some of the math. Let’s use one sales rep as an example, and let’s say this rep has a quota of $750k and $60k base / $120k On Target Earnings (OTE).
Recruitment fees, onboarding, training, ramp: $50k+
Loaded salary cost: $70k+
Opportunity cost of only hitting 50% of target: $375k
Having to go through recruitment, interview, etc. again: $50k+
Morale and Culture hit from this happening over and over: $???
In this example with just one miss, you’re looking at over $500k!
If you bring on 4 new Account Executives (AE) this year, and only hit on 50%, that’s over $1,000,000 gone. And that’s just on the sales team!
Why are some many companies mis-hiring, with rates reported at 50% or more?
I’ve found it generally comes down to two things.
1- A broken, or non-existent, interview structure
2-Lack of transparency or overselling of the role, company, culture or OTE
Here’s a common interview process I see at companies:
- Lead interviewer, new manager, who was not properly trained on how to interview, Googles some interview questions to ask.
- Asks 10 completely different questions to each candidate
- Doesn’t leave the candidate any time to ask any questions
- Cultural interview with team members who have not been trained on what to ask, what to look for or let alone how to conduct this interview.
- Offer the job to Bob as he was always punctual, told a funny story and you could see him being fun to have a drink with after work
- Mentions an OTE of $xxx, which only 15% of the team has actually achieved
- Miss on 50% of candidates.
More Effective Approach:
- Be honest about expectations, compensation, financials, culture, etc. If you put yourself in a position where you’re overpromising and under delivering, you’re setting yourself up for some high churn rates.
- Have training sessions on how to interview across the company.
- Be consistent with the questions you’re asking to fairly evaluate each candidate.
- Leave plenty of time for candidates to ask questions – great way to see how prepared and how inquisitive they are about the role/company.
- Figure out ahead of time what characteristics make for a fantastic hire for this role (high EQ, IQ, Coachability, etc) and ask behavioral questions centered around those.
- Prep others that will be a part of the interview process in a similar manner.
- Create an evaluation spreadsheet to most accurately identify the top candidates based on those characteristics above. Have a plan on what the steps are in each round and how many will advance.
- If warranted, set up a role play interview to see how the candidate presents and how quickly they learn.
