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The High Cost of a Bad Hire

Entrepreneurship - Dave Ramsey
dave ramsey America's trusted voice on money and business, Dave Ramsey is a personal money management expert and extremely popular national radio personality. His three New York Times best-selling books - Financial Peace, More Than Enough and The Total Money Makeover - have sold more than 6 million copies combined. His latest book is EntreLeadership: 20 Years of Practical Business Wisdom from the Trenches.

The High Cost of a Bad Hire

The High Cost of a Bad Hire

What’s the cost of a bad hire? It’s much more than you think. According to the U.S. Department of Labor, the actual dollar figure can be as high as 30 percent of the employee’s first-year earning potential. When you add in the loss of productivity and possible damage to customer relationships and your workplace culture, the overall price tag can be huge.

In order to grow your business, you need to have the right people on board. And that starts with the hiring process. Finding the perfect fit for each position in your company is a skill that can be learned. So, to help you get started, I’ve listed a few of the biggest missteps and how to avoid them.

Mistake: Hiring too quickly

As an entrepreneur, it’s probably in your nature to get things done and move quickly while doing them. When it comes to hiring, this is the worst thing you can do. If you rush filling a position, odds are you’ll soon be trying to fill that same position again.

Take your time and wait for the perfect person for the job. “Good enough” is simply not good enough. At my company, the hiring process consists of several interviews over a period of weeks or even months. We even interview the candidate’s spouse. A husband or wife can tell you pretty quickly whether the position is right for that person, and if it will be a fit for the family.

The next time you interview someone, start the process with a 30-minute, “get-to-know-you” initial meeting. Your objective is to listen, and ask a few questions. It’s a great way to weed out the less desirable candidates, and sniff out the winners who will continue to the next round.

Mistake: Vague job description

Have you ever hired someone before you’ve actually figured out their duties? Then, three or four months down the road, you can’t figure out why things aren’t running smoothly? If you said yes, you’re not alone. Not showing team members—especially new team members—how to win at their jobs is one of the most common mistakes small-business owners make.

Create a detailed, written job description before you hire someone for a position. We call it a Key Results Area (KRA). A KRA clearly defines, in detail, what the team member needs to do to be successful in their job. By writing the requirements down, you clarify the position for both yourself and your potential new hire.

Mistake: Hiring employees instead of team members

When interviewing a candidate for a position, your sole focus should be on experience. If they can do the job, the rest will naturally follow, right? Not always.

My advice is to look for passion and talent. Do their eyes light up when they talk about the job? Are they full of enthusiasm and on fire for what you’re doing? Your goal should be finding a team member who will be on a crusade for your company.

This may be easier than you think. In many cases, your best bet for finding quality team members is through the ones you already have.

Make a commitment to ask your staff for referrals. Remind them to recommend only the cream of the crop. Remember, you have an awesome place to work. Don’t spoil it with a lot of craziness and drama!



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Dave Ramsey is America's trusted voice on money and business. He has authored five New York Times best-selling books: Financial Peace, More Than Enough, The Total Money Makeover, EntreLeadership and Smart Money Smart Kids. His newest best-seller, Smart Money Smart Kids, was written with his daughter Rachel Cruze, and recently debuted at #1. The Dave Ramsey Show is heard by more than 8 million listeners each week on more than 500 radio stations. Follow Dave on Twitter at @DaveRamsey and on the web at daveramsey.com.

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