One of the lessons we’ve learned in our CEO Roundtable discussions is that we all are too slow to fire and too fast to hire key management for our companies. This seminar focused on the hiring side of the problem. Very few of us think that we are excellent when it comes to hiring key executives. We have made mistakes – mistakes that have been very expensive. And, as smaller companies, we cannot afford to make these mistakes very often. Bradford Smart, author of the management classic Top Grading, estimates that when indirect costs are fully counted, a bad hire costs us 24 times the base salary. Direct costs alone usually are 60% of base salary.

Larry Stybel of Stybel Peabody led a discussion on this very real problem with a group of CEO Roundtable members. Often we turn to professional recruiters to help us succeed at hiring, but recruiters fail more than 50% of the time to help us hire an executive who is still with us in only 12 months – and this rate would be worse if we looked at an 18-month time frame. Larry suggests you should always insist on an 18-month guarantee from recruiters rather than the usual 12-month guarantee. You might also consider hiring a headhunter just to find candidates and a professional interviewing and evaluation resource to help with the final selection.

There are ways to improve our success. Perhaps most important, we need to have a very well-defined process in place that is used for all hiring decisions. We can learn how to do better interviews. One suggestion Larry emphasized is to ask for stories from the candidate rather than to ask direct questions, and to ask for stories when doing reference interviews. Repeat the same type of question several times. See what themes seem to be repeated between stories and between interviews – are the themes indicative of the qualities you need? The prospect is probably better at being interviewed than you are at interviewing. Some of us prefer to “trust our gut” rather than have a disciplined process in place.

But hiring is only the first step – you are hiring for a reason other than giving a person a job. You are hiring for results that will benefit your company. What are you doing after you hire the great person? Do you have an on-boarding process in place to help ensure that the new hire is successful, fast? You have made a big investment in the hiring process – don’t just assume the job is over when the contract is signed. Larry says you need a “platform for success” to help you get all the return you are expecting from the new talent you brought into the company. You need to document the “going-in mandate” for the new hire. You need agreed goals and time frames on such questions as:

What needs to be changed in the next 12 months?

What needs to be preserved and honored?

What needs to be left alone for now?

What is the third rail in your company – that which cannot be touched?

But successful on-boarding doesn’t ensure that you will get the maximum return on your investment. You also need to have a well-defined program to help the new hire (even at top levels) continue to develop to full potential – and therefore provide maximum return. Executive coaching was discussed as one way to help this process. Coaching is intended not to fix weaknesses but to develop strengths. Providing coaching and other special development opportunities should be seen as recognition of the potential of the executive to add more value to the enterprise. Learning is a lifelong process.

The discussion was very lively and the stories of mistakes made were plentiful. Running smaller companies is very difficult, and paying attention to these issues often gets overlooked in the rush to fill a hole in the team – and we are too fast to hire.

For more information on Stybel Peabody, please visit their website, http://www.stybelpeabody.com/. You can see Platform Success here and you can check out the most recent CEO Roundtable run down here.