40% failure rate! What should HR do?

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If any organization failed 40% of the time with its product launches, or with the quality of its product, it would not stay in business. However, according to an article by Human Resources Director of Canada that is exactly what is happening with executive hires today.

Research shows that 40% of newly hired executives fail in their new jobs within the first 18 months – often citing a struggle to adapt to the new culture and difficulty getting up to speed in their new role.

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The question the HR department needs to consider is, what is the best practice for hiring? Is it best to h­ire externally or to select from within? Of course, there is no blanket answer to this question. However, the University of Pennsylvania found that external hires get paid approximately 18% more than internally promoted workers, yet they perform worse, based on peer reviews.

Let’s review the numbers. Hiring executives externally, the failure rate is 40% and it costs the organization 18% percent more for the privilege of having someone whose performance is worse than someone hired from within the organization. This does not add up to a successful HR practice.

HR must constantly reflect on all of its practices, from hiring strategies to employee development, and make sure that these practices are not only complementary to each other but the correct strategy to meet their organization’s strategic goals.

 

Discussion Questions:

  1. Conduct some research and identify two organizations that primarily use the “selection from within” process. Prepare to present why they have chosen this HR selection practice and what their successes from hiring from within are.
  1. Identify the most significant and compelling reasons why an organization would choose to hire externally for senior executive positions?