How to Avoid Hiring Mistakes and the High Costs of a Bad Hire

Avoid Hiring Mistakes

Faced with a shortage of highly skilled accounting and finance talent, hiring in the finance sector right now is challenging at best. But even though you have to act fast to land your top candidate, you shouldn’t be hasty.

The costs of a bad hire are high. A recent Robert Half survey shows that the top two effects of hiring mistakes are decreased staff morale (39 percent) and lost productivity (34 percent). Monetary costs, cited by one in four respondents, came in at third place. 

It’s important to get it right the first time around. Here are some tips for avoiding hiring mistakes:

1. Write spot-on job ads

To get the applicants you want, include the right criteria in your job postings. Start by writing an airtight job description: requisite skills, preferred background and certifications, a list of soft skills necessary for the position and so on. The more you can discourage unsuitable applicants from applying, the smaller but stronger your applicant pool will be.

2. Vet the applications

To reduce the chances of making hiring mistakes, make sure you have a rigorous evaluation process in place to prevent potential bad hires from sneaking onto the short list. The evaluation process starts with scanning cover letters and resumes for red flags, namely poor grammar, typos, excessive job-hopping, unaccounted for employment dates and inappropriate humor. Don’t automatically dismiss candidates with a break in their work history, however. If they are otherwise well suited for the position, ask them during the next step about resume gaps you’ve uncovered.

3. Do a phone screening

A 10- or 15-minute phone interview is a good way to further pare down the list of candidates and weed out possible bad hires. Eliminate the ones who look good on paper but don’t have the communication skills for the role.

4. Bring in top candidates

Now that you’ve whittled down your list to the top three to five candidates, it’s time to bring them in. There are two main components to the in-person interview: the right questions and the right set of interviewers. Invite colleagues who can help you judge the technical skills of the applicants as well as those who can evaluate their soft skills, such as communication and presentation. Listen for candidates’ level of enthusiasm: Technically brilliant applicants who are lackluster about the position or your company may seek employment elsewhere shortly after they’re hired.

Also assess their personality when they’re not “on.” A great way to do that is to solicit feedback from staff who were not in the meeting room, such as the parking lot attendant, security guard and receptionist. If candidates aced the interview but were rude to other employees, strike them from your list. The last thing you want to do is to hire bullies or jerks.

5. Check references

Though you want to act fast and land your top pick before he or she accepts another position, due diligence is the key to avoiding the high costs of a bad hire — and that includes reference checking. While it’s not always easy to obtain a candid reference from a former employer, doing so is an important step to take before hiring someone for your firm. Ask each finalist for the names and contact info of three to five professional references. Then take the time to contact each one, preferably by phone. 

6. Check backgrounds

Just as reference checks allow you to verify with former employers a potential hire’s accomplishments and personal attributes, background checks delve into additional aspects of a candidate’s activities and behavior in an effort to reveal issues that could affect future job performance. These pre-employment checks can pick up troubling issues with applicants’ credit history or criminal background, a serious consideration for work in accounting and finance.

Unfortunately, many types of background checks are subject to considerable restrictions, both legal and logistical. An employer must determine what, if any, measures are needed based on the nature of the business and the position. If you decide in favor of conducting checks, choose a reliable third-party investigator and seek legal counsel to make sure you gather and use this information lawfully.

Hiring mistakes are serious. Underperforming employees can cast a pall in the workplace, bring down productivity and damage your company’s relationships with clients. Poor hiring decisions can also jeopardize morale by leading your current staff to question your judgment. The key to avoiding the many high costs of a bad hire is to not take shortcuts. Work hard now to minimize the chances of a blunder later.

This blog post first appeared in the Corporate Finance Insider newsletter from the American Institute of CPAs (AICPA).