Why do managers hold on to bad hires for so long?

I’ve been very public about my philosophy on hiring. I do not hire to fire. In no way do I hire someone thinking “I can’t wait until the day I fire them!”, I don’t think any of us really think that!

I hire someone believing that with the right training, development, and support, they will be wildly successful! I own at least half of that equation, the person I hire owns the other half. Many times it works, sometimes it doesn’t.

The problem with my philosophy is “Sunk Cost”.

Sunk cost is an accounting philosophy that means a cost that has already been incurred and cannot be recovered. So, you’ve already sourced, recruited, and trained an employee. You’ve gone beyond training working to develop them. All those costs are now spent.

BUT – because you’ve ‘invested’ those costs into an employee, you are less likely to let them go believing you are more likely to get a return on those costs. In reality, there is absolutely zero evidence that shows you’ll get any return for future investment into that employee, but we really struggle to give up on them based on what we’ve already spent.

This is super common in the management of people resources!

Well, I’ve already dropped $50K into Tim, I guess another $10K isn’t that bad. When in reality that $10K is actually way better spent on another employee, and you fire Timmy!

I’ve known about Sunk Cost for a long time, but now there is actually scientific evidence to back up the fact we should be firing failing employees sooner:

“Sunk costs are irrecoverable investments that should not influence decisions, because decisions should be made on the basis of expected future consequences. Both human and nonhuman animals can show sensitivity to sunk costs, but reports from across species are inconsistent. In a temporal context, a sensitivity to sunk costs arises when an individual resists ending an activity, even if it seems unproductive, because of the time already invested. In two parallel foraging tasks that we designed, we found that mice, rats, and humans show similar sensitivities to sunk costs in their decision-making. Unexpectedly, sensitivity to time invested accrued only after an initial decision had been made. These findings suggest that sensitivity to temporal sunk costs lies in a vulnerability distinct from deliberation processes and that this distinction is present across species.”

This scientific study showed both humans and rats basically do the exact same thing. If we feel we have already invested a ton of resources in a task, we are more likely to continue pursuing this task even when all the evidence to that point has only shown failure!

This is Poor Performing Employee Management 101!

-You hire an employee.

-The employee gets trained and should have the skills to perform the job.

-The employee doesn’t perform the job, so you give more resources to help get them up to speed.

-The employee still doesn’t perform.

-The manager decides not to terminate the employee, but to continue to give more resources and chances.

Why do we do this?

You hired 3 employees before the failing employee and all three completed training and did the job successfully. We know the process works. So why do we not fire the employee?

Sensitivity to Sunk Cost. We are as dumb as rats when it comes to investing our own resources into failing employees. We act the exact same way!

It has nothing to do with the employee and our desire to give everyone a fair shot (I don’t hire to fire). It has everything to do with our own internal drive of not wanting to lose, what we feel we’ve already invested, even when all the data tells us future investment is akin to burning a pile of cash.

So, don’t hire to fire, but also don’t be as dumb as a rat and not fire someone who shows you they can’t and won’t do the job you hired them to do!

Should You Be Promoted Every 3 Years?

ZipRecruiter Co-Founder and CEO, Ian Siegel thinks employees should be on a consistent cadence of being promoted, or there is a problem. Basically, he said it should be every three years. Do you agree?

Early-career employees should aim to get a promotion around every three years, according to Ian Siegel, CEO of ZipRecruiter. “If you aren’t moving up after three years, there is a problem,” he said.

Let’s say you start your new job right out of college at 22 years old.

First job title (Individual Contributor): HR Generalist 

Second job title at 25 years old: Senior HR Generalist

Third job title at 28 years old: HR Manager 

Fourth job title at 31 years old: Senior HR Manager

Fifth job title at 34: HR Director 

Sixth job title at 37: Sr. HR Director 

Seventh job title at 41: Vice President of HR

I’ve told this story before but I had a goal coming out of college that I wanted to be a Vice President by 35 years old. I spent the early part of my career chasing titles. I became a Vice President at 38. Upon becoming a VP at 38 I immediately realized it didn’t matter at all!

Titles are organizational-size specific. If you work for a 250 person company (or a bank or a startup) becoming a VP of whatever probably isn’t too hard. If you work for a company that has 25,000 employees becoming a VP is going to take some time. Also, are you really a Vice President when you have 2 direct reports, or when you are responsible for an organization of hundreds or thousands?

The reality is titles are basically meaningless to everyone except yourself.

I think Ian’s math actually works out for large organizations. If you start working for large companies, the three-year promotional cycle probably works out in most normal economic environments for above-average performers who meet the following criteria:

  1. Have the desire to continually move up.
  2. Have the ability and desire o relocate.
  3. Have a specialized skill-set or education.
  4. Have a willingness to go cross-functional and learn all parts of the business.
  5. Have the ability to play the political game.

You don’t get promoted for just showing up and doing the job you were hired to do. Every idiot in the company can do that. Showing up doesn’t make you promotable.

There are probably a few things that can help you move up faster than I think most upwardly mobile professionals don’t know. You need to make your boss know that you want to move up and you’re willing to work with them to make that happen. Working with them doesn’t mean trying to push them out, it means you will work to push them up.

You need to have a developmental plan that your boss, and maybe the boss above them, has signed off on. This plan is your responsibility, not their responsibility. If you think it’s your boss’s responsibility to make your development plan and push for your promotion, you’re not someone who should be promoted. Own your own development, with their guidance.

Understand that three years is an average. You will be promoted sometimes in six months and sometimes in six years. In some career paths you’ll be promoted three times in three years, but then not again for nine. The right amount of patience is critical in getting promoted. One of the biggest mistakes I made in my career was jumping companies for a title because I thought my current boss wasn’t going anywhere and three months after I left he was promoted and told me I was in line to take his spot. I loved that job! I had no patience.

Being promoted has nothing to do with time and everything to do with you putting yourself in a position to be promoted.

#InternalsFirst

In the past 30 days, I’ve spoken to a dozen Talent Acquisition leaders across a bunch of industries and markets. There was one common theme, “Holy crap, our req load just doubled or tripled almost overnight!”

The conversation always went to how and what can we do to get more candidates faster!

One, out of twelve, actually had the insight to comment, “we have to make sure our internal employees, first have the option to move into some of these roles, if they desire”.

She mentioned they branded this movement within their organizations – #InternalsFirst! 

The reality is, and she knows this as well, it’s not one or the other, it’s both, but I love the focus on internals as we come out of the pandemic and start increasing our hiring. Yes, we need to fill these openings, but also, yes, we need to engage our internal talent, or we’ll have a much larger problem in the second half of 2021.

We give our internal talent a discount on value. “Oh, yeah, Jenny, she’s good, but we know her and her capabilities, what about Mary, the new shiny, candidate we know nothing about!? She might be 8% better than Jenny!”

Stop it. You’re embarrassing yourself! Mary isn’t better, she’s just new and shiny. Mary has that new employee smell! Jenny lost her new employee smell and now she just smells like everyone else.

As we come out of the pandemic, our internal talent is starving to be engaged. To be noticed. The worse thing you can do, when hiring picks up is to forget about them. To make them feel like an afterthought.

#InternalsFirst