Hiring the wrong people into senior positions is a big financial and reputational risk. Recent research shows that 48% of new hires fail within the first 18 months. For execs earning up to $300,000 this can be 3.5 X the salary cost, but at the most senior end the costs can be close to catastrophic: CEO failure will cost anywhere from $14M to $60M.
So why are there so many bad hires and what can be done about it?
At a recent conference for Senior HR leaders in Pharma and Biotech in Boston, the lack of due diligence and a focus on the cost of hire rather than return on investment were cited as major causes of failure.
Due diligence is used to support every major business investment. Can you imagine any M&A without it? So why do we take significant risks in hiring (often) by gut feel and ‘chemistry’. The answer of ‘because its complicated’ is just not good enough.
Cost reduction has led to a false economy: under resourcing of vital hiring projects, with many large businesses now using low cost, low diligence RPO processes for exec hiring, which can compromise the company’s future.
Many life sciences HR leaders see RPO as ‘a race to the bottom’ and a factor in why the larger companies are less successful in the war for today’s game-changing talent.
Another cause cited is the lack of bespoke on-boarding for newly hired execs. New hires often come from widely differing business cultures, lacking the networks and support needed to deal with the pressures of a new job, where they are expected to make an immediate impact. Many HR pros believe that in addition to the basic onboarding , targeted coaching & mentoring should be mandatory in the first six months. Imagine the difference if the onboarding spend was even 20% of the exec’s travel budget!
Steve Jobs said, “a small team of A+ players can run circles around a giant team of B and C players”. Most investors and CEOs agree with him that people are their most valuable asset, but the collective absence of due diligence and on-going support of new hires is neglectful at best.
Isn’t it time we walked the talk? Call us now