INTERVIEW EDGE • JULY 1998

Cost of Hiring Mistakes

As salaries for top business people continue to climb into the stratosphere, companies will find themselves paying increasingly high prices for poor hiring decisions. A case in point: when Michael Ovitz left Disney after a troubled fourteen-month tenure, his severance package exceeded 100 million dollars. Even in the less rarefied air outside Hollywood, however, mistakes can be expensive. A decade ago, for example, MBAs earned as much as law school graduates. Today, their salaries exceed the salaries paid first year lawyers by as much as 50%. In fact, MBAs graduating from top schools typically receive $120,000 offers, with the best students often seeing compensation packages of well over $200,000. When it comes to hiring the wrong candidate, the term "costly mistake" has never been more accurate.

Unfortunately, limiting your choices to the brightest students from the best schools is no guarantee that there will be a good fit between a candidate and your corporate culture. Or that, as with Ovitz, the star you hire today will be at your company two years from now.

Finding and retaining top employees is more than a matter of looking for good grades and a prestigious alma mater, or an impressive reputation. It involves using past history to predict future performance, and matching a candidate's values and style, as well as her talents and skills, with those of your company. Using methods like these can help you make the right decision the first time and keep you from paying for mistakes at today's inflated prices.