The recent episode involving former IU basketball coach Kelvin Sampson underscores how badly broken is our system of recruiting and qualifying top leaders. Reference checks by highly paid professional recruiters failed to turn up the true nature of this leader.
Yes, we all were aware of his lack of character at the University of Oklahoma, but were there signs of this lack of character in his past at Montana Tech or Washington State University? One would hope the recruiters went back to his first job in the industry, but we will never know. The multiple costs of making such poor hiring decisions are the greatest drain on educational and business resources.
There is no greater and more productive outcome in business than to hire the right person for a leadership post. Conversely, though, there is no more costly blunder than hiring the wrong person for the job. The hard costs, such as recruiting expenses, moving expenses and severance, are actually the least of it. It's the lost opportunity costs, the broken customer trust or the dispirited morale left behind that are the greatest costs. Faulty recruiting practices and resultant poor hiring decisions cost American business es billions of dollars every year.
We all know the standard drill. The head of sales slot has been open five weeks and you need someone now. You've hired a headhunter who's turned up some warm bodies, but no one has popped.
Then, finally, someone turns up who "looks pretty good." Sure, you have some doubts, but the skills line up pretty well, you're swamped, and you want to move. The story on the applicant's last job change is a little odd, so you know the reference checks are important. What do you do?
You're buried on other seemingly more important matters, so you get the person's four-name reference list, make one call yourself, and ask the recruiter to make the other three. At this point, have you improved your chances of hiring the right person? No. In fact, you've turned the filling of a crucial slot into little more than a random process. If you hire the wrong person for this $150,000-a-year job, it will take you three months to make a change, lots of china will be broken, and your all-in cost for the mistake will be on the order of $500,000 or more. How can you increase the odds of success?
Get a real reference list. Require that the reference list have at least two people from every prior job, including the person's direct boss in every case. You'll find most lists have one former boss, a college pal and a co-worker or two. That's just not good enough.
Don't rely on recruiter references.
I'm not trying to impugn recruiters, but don't rely entirely on their reference calls. The fact is, they want to get paid and move on to the next hire.
Do background checks. Hire a background firm to check the candidate's financial and litigation history.
Make a professional assessment.
Have the candidate submit to two hours of written exams and three hours of interviews with industry pros.
In the past, many employers would not provide much information on former employees out of fear of being held legally liable. Without exposing themselves to legal liability, some companies are now providing what is called a "full disclosure" reference. This is just what it sounds like; everything that is documented is put on the table in the form of a letter. Also keep in mind that several states have enacted laws protecting employers from civil liability when they provide references that include job-performance information.
People make business happen, period. Human-capital mistakes are, by far, the most costly, and all efforts must be made to avoid them. That way, perhaps you'll avoid hiring the next Kelvin Sampson or Rick Greenspan.
Ford is president of All State Manufacturing Co., a Terre Haute maker of food-service equipment, and a principal with Edison Strategies, a Missouri consulting firm.