The Costliest People Mistakes We Make

For as long as I can remember, executives and HR department administrators alike have struggled with the problem of turnover and the associated costs. For some companies, turnover is merely an annoyance, but for others, it’s a huge and costly problem. Whereas turnover is currently the headline grabber, a far more consequential issue involves poor people decisions, which never show up in the turnover metrics.

How Many Bad Apples Are in Your Barrel?

Many, if not most, organizations employ marginal performers in critical positions when they shouldn’t be there! Like the proverbial bad apple in a barrel, the entire organization pays the price when this happens. Understandably, the ramifications vary given the variety of different contexts in which they may occur, but the ensuing consequences dramatically outweigh the more clearly measurable costs of turnover. As immense as turnover costs are, the damage is minor when compared to the implications of keeping underperformers in place, a problem that undercuts revenues, growth, and profits today and tomorrow and can even challenge an organization’s business stability.

It’s not surprising at all that business and government organizations make questionable people decisions and, for a variety of reasons, continue to live with them. Sometimes underperformers are skilled politicians with well-honed survival talents; in other instances, there are blind –spots – performance and relationship issues that are plainly visible to subordinates but don’t show up on the radar of managers. The halo effect can also be a factor when reputation or past performance tend to color what the boss and others choose to see. Or, as behavioral experts tell us, many people simply cannot admit to themselves that they made a mistake, and they will stick with their choice, irrespective of the facts. Peter Drucker best summed up the pervasiveness of the problem in an article in the July-August 1985 issue of Harvard Business Review:

Executives spend more time on managing people and making people decisions than on anything else – and they should. No other decisions are so long lasting in their consequences or so difficult to unmake. And yet, by and large, executives make poor promotion and staffing decisions. By all accounts, their batting average is no better than .333: at most one-third of such decisions turn out right; one third are minimally effective; and one third are outright failures.

In no other area of management would we put up with such miserable performance.

We Have People Problems

To play with Drucker’s analogy for a moment… In baseball, a .333 average is pretty darn good, but a .200 hitter, a reliever with a 5.2 ERA, or a starting pitcher with a 3 and 9 won-lost record are not going to propel the team into the playoffs at season’s end. If the manager can replace any weak link to strengthen the team, he won’t hesitate for a moment. But with many jobs in business, it’s not nearly so obvious when someone may be a .200 hitter, or even if the person’s hitting ability should be suspect. Interdependent relationships mean that we operate with much less personal visibility than the players on a baseball team, and consequentially with less individual accountability. In business, there are more places to hide than there are on a baseball field.

Quite apart from the issues of why and how, dubious people decisions occur more frequently than we may be willing to admit, and that’s why so many things don’t work and we encounter so much apparent dysfunction in every aspect of business and life. My sense is that the ratio of these “minimally effective” decisions is even greater now than when Drucker made his famous remarks 30 years ago, and for predictable reasons… A dearth of qualified people (demand greatly exceeds supply), inadequate and misdirected candidate assessment, shortened tenure (read experience and knowledge), and insufficient management training likely account for most of these occurrences.

It is interesting to note that only one of the reasons above is primarily outside the control of the organization: the supply-demand problem, which is a huge issue. Organizations like to think that they hire the best people out there, but in fact, in some areas, managers often settle for the best they can find at that time. There are limits to how long they feel they can leave a key function unattended, so increasingly, employees are being hired out of exasperation rather than exuberance. Sometimes, just to move forward, it’s even a matter of settling for the best of the worst.

Causes and Solutions

If it weren’t enough of a challenge just finding quality people, hiring problems are compounded by the fact that a great many managers muddle around with their people decisions. Certainly, some are very perceptive and astute in reading people, and others have occasional insights, but across the board, most managers aren’t particularly knowledgeable about that which is at the core of their jobs: human behavior, motivation, traits, and how they affect job performance. For years, employee surveys examining satisfaction and engagement have made that very clear. These managers don’t really know why people are or are not successful, or what they should be looking for when they need to replace people or fill new jobs. What happens is that they simplify what they cannot understand, they seek quick, easy answers, and they generalize about and stereotype their job requirements.

Several years ago, I asked five sales managers in completely different industries to describe for me what they were seeking in their sales candidates. Among them, one of the businesses was technical sales, another an outbound call center, and a third involved financial services. I asked for as much detail as they could provide, but what came back were brief, remarkably similar general descriptions. Their responses indicated that they were seeking the same type of candidate, despite all the great differences in their products and services, the nature of their jobs, the sales processes and job activities, their buyers, their selling cycles, and their reward structure. The sales managers were experienced, yet they could only express generalized notions like “strong communication skills” and “closing ability,” apparently failing to see and articulate the behavioral subtleties and nuances of their sales roles.

The solution to this knowledge gap is training – giving managers a more scientific understanding of workplace behavior. In particular, managers need to learn how to understand the motivational and behavioral differences among individuals and how these differences affect job behaviors and performance. Such training can enable more accurate performance predictions. That’s what we offer with ourMaximizing Human Performance training. It’s not theory, it’s not about abstractions such as leadership. It’s empirical, it’s working knowledge about what makes people tick and why they do what they do.

Using the Right Tools to Get Better People and Productivity

Even if we arm managers with the knowledge that they need to better understand individual behavior, they still need the right tools to assess job candidates. Rigorous job analysis, to identify performance-relevant behaviors, is at least 50 percent of the hiring process and is an absolute must for identifying those behaviors that will likely improve job performance, and those behaviors that will prove to be counterproductive. But generating this level of specificity and detail for all jobs requires more time and collaborative effort than most time-pressed managers want to invest. This is why organizations resort to:

  1. simple functional descriptions, which are valueless in hiring
  2. lists of competencies that are too long and too vague
  3. behavioral profiles that are so superficial and general that everyone can fit in somewhere

As the phrase goes, the devil is in the details, and there is no substitute for having a clear picture of what’s important in a job, and how much is necessary.

Interviews Alone Won’t Tell You the Whole Story

Unfortunately, interviews just don’t help much when it comes to matching candidates to job requirements. They are useful for certain purposes, but we must understand their practical limitations. No matter how structured interviews are, or whether individuals or panels are involved, they are still subjective and open to the variances of personal interpretation. The interview atmosphere is often artificial and not necessarily job-relevant. Candidates play roles, and many are often very good at selling themselves; a smart candidate is generally more than a match for a smart interviewer. Responses, then, are often times embellished and can always be fabricated, with little opportunity for verification. An all-too-common outcome is that interviewers with only their general perceptions of what a job requires know to look for only a narrow range of attributes, and they make up their minds when they believe those attributes are or are not present. This is a variation of the halo effect, and it is a major factor in bad decisions. I am still looking, but I have yet to find any bona fide study showing meaningful correlations between interviews and subsequent job performance.

Somewhere around 40 percent of organizations augment their interviews with behavioral testing, but for various reasons, the testing process is hit and miss. Having some objective means of measuring and calibrating candidate behaviors is very beneficial, so long as the instrument is valid and reliable, can be linked to job analysis tools for job-relevancy, and has been developed for decision-making applications. This generally requires a normative design, as opposed to the ipsative personal assessment tools, such as Myers-Briggs or DISC or even simple raw score tools.

To avoid mistakes, combining quality behavioral assessments with job-relevant and appropriately administered simulation exercises is a particularly powerful one-two punch. Combining the two means that the assessor’s observation of behavioral skills and talents can either verify what the test predicts or show how the candidate’s experience and cognitive abilities augment performance potential. Going through the candidate evaluation process and being able to generate this type of insight is pure gold, and goes a long way toward eliminating mis-hires.

Will beefing up assessment procedures completely prevent the problem of hiring marginal performers? No, but it’s a start. At a minimum, there are two other areas to investigate and self-check:

  • Assuming that employees with sound-byte résumés have really gained the experience and know-how you are seeking
  • Assuming that candidates coming from a managerial background have the management skills necessary to be effective people managers

Job-hopping seems to be the new normal, especially with Millennials. According to the BLS, their job tenure averages 3.1 years as opposed to 4.6 for all employees, and over 5 years for Boomers. A quick look at the 500 largest public companies shows that about 100 have average employee tenure of 2 years or less! The issue here is knowledge and competence. Other than exposure to more people, how much do people really learn about industries, problems, solutions, carrying projects through to completion, living with the consequences of their actions and decisions, and developing their replacements, when they ride the bus for just one stop? Not much, I contend, and certainly not enough to be strong contributors in the brief interval they plan to remain with your organization.

What managers know today about management pales in comparison to what managers used to know, and this is not simply a maudlin look back to a bygone time. When people used to remain with companies for many years, employers invested significantly more time and resources in developing their managers, and they got payback. Today there is added emphasis on skill and technology training, and on such areas as managing change, critical thinking, and innovation, but the fundamental management skills like goal setting, coaching, performance management, and developing people seem to be assumed or taken for granted. Some people I have encountered actually believe that, in this supposedly more sophisticated era, such training is unnecessary.

There are two messages here: Look at your own management training (not leadership training!), if it exists at all, and see if you are really teaching your managers the fundamentals that are so vital to their effectiveness. Just remember, people leave managers, not companies. A sampling of articles from those who write about their work experiences carries the common theme of poor managers who don’t really understand what managers should do and how they should handle and communicate with their people. The results are employees who feel devalued, mistreated, and unrecognized. Bad people drive good people out the door.

We all like it when things work as they should, especially our own businesses and those organizations upon which we are so dependent – government, airlines, home builders, and manufacturers, to name just a few. But things don’t happen the right way when incompetent people avoid discovery and occupy important positions.

It was almost 50 years ago when Dr. Lawrence Peter wrote his famous “The Peter Principle,” which explained why people were promoted to their levels of incompetence and remained there. Back then, they tried to bury the problem and turn it over to someone else by bumping people upstairs. Today we allow marginal performers to walk through the front door, and increasingly, the consequences affect our customers. That’s hardly progress!