The 5 Most Costly Hiring Mistakes (Which of Them Are You Guilty of Making?)

05/14/2015 12:52 pm ET | Updated May 14, 2016

Shelly ran a second generation manufacturing business with sales just under $5 million per year. They were in the process of looking for a new inside sales person to replace the last one they had fired 6 months earlier. We were talking at a business conference I was speaking at and as I asked her more questions a pattern became very clear.

Me: "Why did you fire your last inside sales person?"

Shelly: "We discovered 3 months into the relationship that he had a criminal record."

Me: "And what about the sales person you had before him, why did you let him go?"

Shelly: "He was just milking the inbound leads and taking orders. He wasn't doing any outbound selling at all."

Me: "How did you go about selecting these two sales people?"

Shelly: "They just kind of fell into our lap. We knew one through our personal network of friends. He was a nice guy who had been in sales for over 20 years so he had a lot of experience. And this last one, we met him through a networking group."

Me: "What kind of interview process did you put them through? I mean, why did you hire them versus the other people you were interviewing at the time?"

Shelly: "Oh, we weren't interviewing other people at the time, just them."

You can already see where the conversation was headed. It turned out that Shelly had managed to make every one of the five hiring mistakes I've laid out below.

And the cost? In terms of lost hard costs, around $300,000. In terms of opportunity costs - the experience likely cost her company $1.5-2 million over a 24 month period.

Now before you just dismiss Shelly as a careless CEO, look closely at the list below and see which of these mistakes you're also guilty of making.

One of the most important functions you and your leadership team are responsible for is the selection, hiring, onboarding, and integrating of your top level talent. Yet most business owners repeatedly make poor hiring decisions that come as a direct result from falling afoul of one or more of these top five hiring gaffs.

Considering that the true costs of a bad hirer can be in the hundreds of thousands of dollars, and the value of a strong hire can be the same or more -- each year -- your company needs you to avoid making these all too common hiring mistakes.

As you read through the list, ask yourself, "Which of these 7 hiring mistakes are we guilty of making and what are we prepared to do about it?"

1. Not clearly identifying - in writing - exactly who you are looking to hire.
Without question the single most expensive hiring mistake is not taking the time to think through on paper exactly who you are looking to hire.

a. What key responsibilities do you expect this person to take on?

b. What deliverables will this person need to produce?

c. What skillsets must he or she have?

d. What experience set must they have to be successful in this role?

e. What educational requirements (if any)?

f. What character and personality traits or temperament will they need to be a strong, long term fit?

When you start with this written description, then and only then can you start to craft the right recruitment strategy, prepare your interview questions, and start to talk with candidates about the position.

Too many companies rush this step and as a result they risk making the wrong hire.

2. Allowing yourself to be wowed by irrelevant "star" experiences.
I remember one sales manager I hired for a training company I was scaling. My company was growing at 100% per year and needed to bring on more high level staff to help us maintain that growth.

We found this candidate through an internal headhunting effort (we called up 6 of the most respected companies in our industry we felt who each had great results in their sales efforts).

When we talked with this candidate (we'll call him Tom) we let ourselves get wowed by how he lead a team for this other company that was over 10 times larger than our companies.

The problem was, we let ourselves get seduced by how perfect Tom would be when we reached $50 million in sales. But what we really needed was someone who could help us scale from $7 million per year to $15 million, which is something Tom had never done. He knew how to maintain a working large scale sales force, but he didn't know how to develop one from the ground up. That hiring mistake cost us several million dollars and 18 months of time.

You must hire people who have the experiences and skillset to do the job you need them to do at this stage in your business, not the job that is 3-5 years down the road. Make sure the experiences they show you are the exact ones they'll need to success in the medium term.

3. Not letting your "800lb gorillas" dominate your decision.
Every position has 3-5 MUST HAVES of skills, experiences, or character traits in order for the candidate to be successful in the role you are hiring for. We call these 3-5 must haves "gorillas" as in, if you were sitting in a room with an 800lb gorilla you'd forget everything else and pay attention to the gorilla!

Similarly in hiring, you've got to do your evaluation of candidates and make your final selection based on these 3-5 gorillas. Don't let secondary or irrelevant things sway your decision - let the 3-5 most important success factors for that role dominate your decision making.

4. Talking in hypotheticals, not actual past experiences.
Anyone can have a great answer to a hypothetical situation. You don't want to know what they would do in the clinical and clean world of make believe, you want to know what they have actually and concretely done in their actual past.

5. Allowing them to "date around" while you're looking for a long term, exclusive fit.
It's a lot of effort and expense to spend time interviewing candidates. This is why I recommend before you let a candidate get to the later stages you make absolutely clear that your position and opportunity is one that they want.

Ask them, "Before we do this final round of interviews with our top three candidates, I want to protect your time and our time, is this a position that you definitely want? I think you'd be great for one of the final 3 candidate slots, but I don't want to choose you for this if you aren't sure this is the position you want."

Ask them why. Ask them what their spouse thinks. Ask them if there is any other position that they want more. Do this while they are still in the "selling" role of convincing you that they are the right hire.

If they are playing the field, then I caution you from investing more hiring energy with them. Get them to informally commit that they deeply desire to work with you.

Could they later change their mind? Of course, but if you do your qualifying work before you have invited them to that last round your chances are much greater that your first choice for the job will jump at the opportunity.

Ultimately by applying what I've just shared you'll be able to avoid these all too common and expensive hiring mistakes.