Nothing like a bad-apple employee to make you rethink your hiring practices. Look what these newly enlightened Inc. 500 businesses put their likely hires through
Sometimes a chief executive just has to get burned to get smart about hiring. But nobody could have expected that Ethan Assal's experience would involve actual flames. If there ever was a real fire, that is.
Less than a year into the start-up of his graphic-design business, Ethan Assal, CEO of Executive Presentations (#146), had just brought on a well-recommended salesman. For the first couple of months everything seemed fine. Then came a week when the guy didn't show up -- followed by a rash of appointments he didn't keep. And the portfolio of the company's previous design work he was supposed to be showing to prospective clients? At first he said he'd lost it. Then he said it had burned up in a car fire. Assal asked him to prove it. A day or two later the salesman returned with the singed remains of a portfolio.
Whether there really was an auto inferno or not, Assal knows that his employee -- now an ex-employee -- cost him plenty in lost revenues, irretrievable clients, and damage to his company's reputation. Now he hires only people within his industry, and he checks their references thoroughly first.
Many of this year's Inc. 500 companies don't stop there. To screen job applicants more rigorously than ever, they are turning to personality, behavior, analytical-skills, and drug tests. Sure, companies of all sizes are doing more testing before hiring these days, but it's crucial for a small, fast-growing company to do everything possible to avoid expensive hiring mistakes. The costs of recruiting and hiring a new employee have risen 57% in the past five years, and there are costs to firing, too. Says Craig Aberle, CEO of MicroBiz (#403): "I was once told that most companies spend more time picking out an office copier than deciding on a $40,000 employee. And look which one can cause the most damage."
The commitment to tough screening, corroborated by standardized tests, suggests that many of this year's companies consider those costs too high. Take Michael Jones, CEO of staffing company M.A. Jones Enterprises (#376): burned by a poor hire, who he figures cost him about $4,000 in recruiting and training costs alone, he no longer relies solely on résumés, interviews, and references. Four years ago, with help from a consultant, he developed a behavioral profile in which applicants pick words that best describe a successful salesperson, such as persuasive and unsatisfied, and then choose from a list the words that best describe themselves. Jones believes the technique adds consistency to the interview process and creates a standardized procedure for his five offices. As a result, turnover in Jones's sales department is down by about 20%.
Mendo Akdag, CEO of contact-lens mail-order service Lens Express (#328), took a similar route, creating a profile of the ideal telemarketing candidate based on the skills, previous job experience, education, and personality traits of his best-performing telemarketers. "Turnover is down by more than 10%," says Akdag, "and the overall performance of the telemarketing staff is up by 30%, based on average hourly commissions."
Of course, tests like those are only one element of any screening process (for one thing, their applicability varies from state to state), and they are used mostly to confirm what is already believed about a candidate. But that kind of affirmation is vital when you're growing as fast as the Systems Consulting Group (#449), a systems integrator that has brought on 140 new employees so far this year. The company requires all new hires with job experience -- programmers, project managers, and directors -- to submit to a two-hour logic and analytical-skills test, which assesses an applicant's problem-solving abilities, attention to detail, and concentration. One question asks candidates to process 10 banking transactions in 13 sequential steps, to see if applicants can follow instructions and create a winning procedure. "As we've gotten bigger," says human-resources director Andrea Maizes, "we've needed a second opinion, and this test has sometimes led us not to hire people we'd been high on."
MicroBiz is even more assertive. Says CEO Aberle, "A résumé isn't enough; it's like a balance sheet without any liabilities." But with so much publicity about employee lawsuits, it's hard to get the scoop on possible hires from litigation-shy former employers. So the $8.8-million management-software developer uses an outside agency to administer IQ, personality, and drug tests, and to run checks on all prospective employees' credit histories, criminal records, and motor-vehicles-registry records. The company pays the agency roughly $1,000 a hire and has invested $25,000 this year alone, mostly in interview training. MicroBiz appears to be getting results: two years ago turnover was 100%; today it's 35%.
But there are cheaper ways to pull in well-screened workers. Bruce LaVielle, CEO of office-interior designer Space & Asset Management (#116), uses off-duty firefighters as a supplemental workforce for installing office furniture. The firefighters come with a bonus: their municipalities have already put them through criminal-background investigations, drug tests, and more.
You might say that LaVielle -- a former fireman himself -- stands much less of a chance of getting burned by his new hires.