Owner's Manual

Tempted to hire a candidate just so you can stop searching? Don't

An Inc. reader writes: I'm in the process of hiring a craftsman for our 15-employee company, which manufactures scientific equipment, and I have spent a significant amount of money advertising for the position. I've received many applications, but none have resulted in the "right" applicant. I don't want to blow all that money on advertising and come away empty-handed, and I find myself tempted to compromise. Any advice?

Dr. Pierre Mornell replies: Don't compromise if you can possibly help it. Hold out for the right person. You can't spend too much time or effort on hiring smart. That's because the alternative is to manage tough, which is far more time-consuming.

Recently, I spoke to Gordon Segal about compromise in recruiting. Gordon and his wife, Carole, opened their first Crate & Barrel store in 1962. Today Crate & Barrel has $480 million in sales, and Gordon had recently completed a search for a chief administrative officer. That search was a long, grueling process that cost Gordon lots of time; it involved executive recruiters, many interviews, and prolonged salary negotiations.

"I've been fortunate," Gordon says. "If I'd been a public company or getting ready for an initial public offering, it would have been very difficult to hold out. Our board or investors would have wanted a quick decision." Because Crate & Barrel is privately held, Gordon was able to take his time--and he now believes he has found the perfect candidate. "I've always kept myself in a position not to compromise," he says. "And I believe strongly that hiring the right people is the key to our success."

Of course, many businesses--especially small, growing ones--don't have the luxury of waiting for that "perfect person." Growing companies change every day and every week, and things happen quickly. That puts pressure on entrepreneurs to move rapidly. Plus, in many areas of the country right now, small companies have to compete more fiercely for talent than for capital. For many company owners, the big question is, How do I attract and retain talented people?

Here's the simple truth: recruiting is an exhausting process. "I compromise when I'm tired" is a refrain I commonly hear from executives. As one CEO told me, "My bad hire was the third choice after two others were not hired. I compromised because the search was taking inordinately long. Now I know that no hire is better than a bad hire." Another executive confessed that after a two-month search, he had taken "the next warm body that walked in the door," just to be done with the process of looking. That executive now swears, "I'll never hire anyone again." A third business owner told me that her hiring compromise "cost me the company."

My own estimate is that if you make a mistake in hiring, and you recognize and rectify the mistake within six months, the cost of replacing the employee is two and a half times the person's annual salary. Put another way, the wrong person earning $40,000 will cost your company $100,000. The wrong executive making $100,000 will cost $250,000-- if you rectify the mistake within six months. And that doesn't include the emotional costs.

Sure, sure, you're saying--but in today's labor market, how can I not lower my standards? Maybe by changing the playing field. For example, a manager at a growing company recently came to me, disappointed with the applicants who were responding to her ads for hourly service workers. "How can I get better candidates?" she wanted to know.

"Do you know any businesses that have been successful in recruiting and retaining hourly service workers?" I asked.

She mentioned a business her son works for, a restaurant chain in California. I suggested that she call the chain's headquarters and ask about the company's recruiting practices. Two weeks later she came back to me with this information: Before her son's company opens a new store, it publicizes its arrival at nearby colleges, high schools, and churches. Then the company's subsequent newspaper ads usually get a great response. In addition, the restaurant offers higher-than-average starting wages and good benefits to part-time employees. The company also uses referral bonuses: staff members receive $50 for each person they recommend who is hired--and $50 more if the new employee lasts more than three months.

Without her research, my friend might have just tinkered with her want ad to try to improve response rates. Instead she's now acquired a range of new ideas about recruiting and retaining hourly workers--ideas she can use to attract the candidates she wants.

Can you do the same? Let a wide range of people know what you're looking for in candidates: talk to friends, colleagues, professional associates, board members, ex-employees, and family members. Start working closely with a local school or college that might yield candidates. Look for bulletin-board-type services on the Internet. Don't forget to use your own Web site, either.

Is it always possible to spend so much time and effort on hiring smart? No. But clearly, the wider you cast your net, the more likely you are to catch the right person. Then, happily, there's no need for compromise.

Dr. Pierre Mornell is the author of Hiring Smart! How to Predict Winners and Losers in the Incredibly Expensive People-Reading Game, from Ten Speed Press. He is a psychiatrist and consultant who helps the presidents of large and small companies evaluate and select key people.