Bad Hire: The Preventable Mistake

Hiring an employee can be so subjective and emotionally charged.  Anything you can do to lend objectivity to the process is bound to help you make a better decision.

The bad news is that, when it comes to valuation, you probably have to develop your own.  This turns out to be more important than you might think, though.  Creating your own test means you will be measuring what is important to your practice, not someone else’s.  Valuation is, essentially, a business of judgment.  What you’ll be weighing is your candidate’s judgment.  And what you’ll be weighing it against is your own.

Almost by definition, your test will involve a case study of some sort.  You have to test your candidate’s judgment when it comes to a set of “real” facts.  Start with a five to seven year set of financials with the client’s identifying information removed.  The questions you ask should be designed to help you measure how much the candidate understands about what is in those numbers.

An obvious place to start is: What kind of business is this?  Incorporate questions that test basic ability to calculate answers from the data in the financials.  Use your own experience reviewing and working with this set of financials to develop more complex questions to see whether the candidate can discern the trends that are there.  Are there certain problems that arose during a given period of time?  Can the candidate identify those problems?

Require that the candidate answer in writing.  Time the test.  This will tell you how well your candidate develops his thoughts, and how he operates under pressure.

Use the same test at all levels of experience, then calibrate your expectations for the results.  Your threshold of acceptability will rise and fall depending on where in the food chain you are attempting to hire.

While testing can be useful for making basic yes/no decisions on candidates, it can also help you identify areas of weakness so you’re prepared to address them through additional training and oversight.  It can take a lot of the guesswork out of the hiring process.

As a rule of thumb, don’t use the results of any test for more than 30% of your decision-making.  Combine financial tests, like this one, with a review of a writing sample and reference checks.

As badly as you feel you need to hire someone, what you don’t need is to hire someone that you only have to let go, later.