Why your next hire will probably be a flop

[ravtlv BUSINESSES and their ownI-' ers are good at agreat many things. One thing, however, that family business leaders are not particularly distinguished at is recruiting, hiring, training, and retaining outstanding talent. What are some of the root causes of this deficiency and. more importantly, what mightfamily business leaders do about them?

First, what's the downside of a poor hire? What are the direct and indirect costs? It's hard to put a figure on an item like this because many of the costs are unseen, opportunity costs. Management firms claim that replacing a terminated employee costs an employer between two and seven times annual salary. They also say that hiring and training a new person costs between 25Vo and 2007o of that person's annual compensation. Getting people-especially the wrong people-on your team is expensive!

What about the human toll? How many family business leaders have lain awake at night, dreading having to terminate an employee? Even a fairly new person who hasn't been on the payroll long has feelings and family, and it hurts to have to let people go. And there are other opportunity costs, such as wasted time, lower morale, wasted time on the parts of other family business executives, and unsatisfied customers, as well.

A good employee can do the work of two to three poor employees, so there are also inefficiency/low productivity costs associated with poor hires. The long and short of it is this: poor employees cost family businesses a pretty penny, and the pretty penny is directly proportional to the importance of theposition to the organization.

Why are family business leaders poor at hiring, and why is your next hire likely to be a flop? There are the usual culprits: no well-developed hiring system, insufficient time devoted to hiring and training, theoverreliance on gut feel and intuition, and the over-reliance on traditional hiring methods such as newspaper classified ads, etc.But the main reason that family business owners hire poorly is that theyrely onthe most flawed evaluation tool known to mankind: the unstructured personal interview.

It's easy to understand: anyone who has half a brain can do reasonably well in a 30 to 90 minute job interview. They know, for the most part, what questions will be asked and what the appropriate answers must be. Furthermore, most of the interview time is devoted to talking, and we don't mean talking by the candidate. In most of the interviews that we've observed, when family business leaders are hiring new people, it's almost as if the executives are trying to sell the candidate on the company, instead of the other way around. The questions are usually open-ended ones such as, "What do you consider to be your greatest strengths and weaknesses?" or "How would you describe yourself?" Such questions simply don't compel applicants to reveal much about themselves in an honest or useful way. Is an interviewee going to say, "I have a crack problem and I steal?"

It's much better to avoid first-date type questions and focus instead on specific past job experiences and jobrelated hypothetical scenarios. The idea is to focus on objective, relevant data and tune out any questions that invite the candidates to predict the future, reconstruct a rose-colored past, or ponder life's big questions. Interviews that are structured and all about the facts are sixtimes more effective than unstructured interviews at predicting a candidate's job performance. Some experts believe that job interviews aren't needed at all. Research shows that an aptitude test predicts performance just as well as a structured interview.

So there's part ofthe answer: focus on facts, specific work outputs, and past examples of work instead of piein-the-sky conversation and big picture verbal grandiosity. And here's another concrete idea you can use: Get other people on your team involved. Allow them to observe and comment freely on what they see as a candidate's strengths and weaknesses. If it's true that two heads are better than one-and it is-then getting feedback from the other valued people in your family business makes perfect sense.

A variation on this theme is to put candidates to what we call the "spouse test." When considering an important hire, we often bring in the spouse of the owner and have him or her interview the candidate. They will helpbringthat terribly underrated characteristic - objectivityto the hiring process. By the same token, if you're getting near the decision portion of the process, it's a good idea to have the candidate's spouse come in for an interview. The spouse tests are informal, butthey've proven over time to be outstanding tests for fit and chemistry.

It costs too much time, money, and emotional turmoil to let your next hire be a flop.Apply these 2lst-century hiring techniques and save yourself a lot of trouble, while simultaneously improving the quality of the people around you.

- Wayne Rivers is president of the Family Business Institute, Raleigh, N.C. Reach him at wayne.rivers@familybusinessinstitute.com or (877) 326-2493

Reprinted with permission of the Family Business Institute. No portion of this article may be reproduced without its permission.

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