“The Cost Of A Bad Hire” with Phil Sharkey of The Hire Authority

Nathan (1s):
Welcome back Radio Entrepreneurs listeners and fans, I’m producer Nathan Gobes. I’m excited to have back one of our regular reporters, Phil Sharkey of The Hire Authority, or as we sometimes like to call them sheriff Sharkey. Welcome back Phil.

Phil (16s):
Nathan. It’s great to be here today. Great to talk with you. And that, and I have one that as we were just talking about pre show us some interesting numbers regarding what I see for bad hires out there coast to coast in the industry, and why a background check is so important and why I’m so frustrated and many people that have either pushed them to side with COVID or drop their best practices, or just simply don’t invest in a preemployment screening package. They’re they’re risking so much and it frustrates me.

Nathan (45s):
Yeah, I certainly understand that. And so that’s why this, this month’s Sharkey report is on The Cost Of A Bad Hire on, or we get into it.

Phil (55s):
That, that sounds good, Nathan, the, the average cost of a bad hire, and this is from the us department of labor in a recent study just from last year is 30% of the employees first year earning. So I don’t care if you’re paying someone $12 an hour up to a huge salary. 30% of that cost is what they’re seeing regarding bad hire. So they they’ve told the, the United States department of labor did this survey in the event that you take on an employee. Let’s just say what a yearly salary of $80,000 on a big numbers guy. So I say to my people out there, the other entrepreneurs and business owners, that’s an expense of up to $24,000 in wasted money when it’s a bad hire. And simply speaking, Nathan, our cost is very transparent, a full background check.

Phil (1m 39s):
Those costs someone neighborhood of 250 to $300. But when you weigh that against the cost of bringing someone on board that could potentially cost you large amount of money, 30% of the salary, it seems to be a smart investment to me to, to, to, to go that route and make sure you’re trying your best to make sure you’re getting who they say they are. It’s good business. It’s poor business. Not too.

Nathan (2m 5s):
Yeah. And in this economy with, you know, many business owners are struggling, they’re trying to cut back costs. I think the wrong ones are to cut back our, these background checks, but what you should cut back on our bad hires and those, the huge, you know, huge loss that, that can come with them.

Phil (2m 24s):
How is a huge story? And I have a quote today on one of our wrap-ups at the end of a huge story, the huge ones stick out to, to my clients. I tell them the criminal records of the drug offenders or the people who flat out falsified a job, but it’s not just the large number. They said they also added that CFOs added that not only do they lose out on the loss productivity, but managers have to spend summer neighborhood of 17% of their time supervising poorly performing employees. So the survey went on to say that in a standard workweek, that translates almost a full wasted day that could have been spent on actual work between the manager and the poor employee. Now the background check can catch a lot of these. People’s a full background check with employment verification and references, which supervisors it does come out.

Phil (3m 8s):
You know, as we say, in my business, Nathan, a leopard doesn’t change their spots. So the consistency there, a poor performance or argumentative behavior, those come out in the past history. And if you can avoid that and hire the best person for the job, that’s really the key. I always tell people with a background check it’s information, it’s not always necessarily the grand slam home run of a huge negative issue it’s information, which best might turn you from this person to that person to give them the chance to make the best decision possible.

Nathan (3m 36s):
Right. You know, every business owner, when they’re hiring, they want to look at the resume, you know, maybe a cover sheet, you know, all their, all the information available and, you know, to have, I can’t think of a single business owner who would say, no, I don’t need information. I’ll just take a look at the two candidates and, and, you know, just judge it by eye, the more information, the better

Phil (3m 57s):
Exactly you surely can flip a coin. And they added to a, another survey was in career builder. This was from 2020 that a, a bad hire report in average of $14,900 in wasted money. And that the 74% of the employers say that they could hire, they hired the wrong person for the job. And then a detailed background check would have been essential to helping them with their decision. So like you said, you surely can flip a coin and hope for the best and maybe save the fee of the background check. I personally, I know it’s, my business would venture into bringing on the experts like ourselves. And what we identify Nathan, is that they found this in the survey, you lose lost productivity loss of clients as a possibility damage reputation with clients, damaged, employer reputation, decreased teamwork.

Phil (4m 43s):
And I think the final two stats of a bad hire is recruitment costs, which is as an expense and loss time for supervising and the bad hire like you spoke of. So to me, it’s really in the numbers and we do see this week, for example, we usually see about 33% are fraudulent. We were up to like 50% of the background checks. We’re conducting fraudulent information. So one out of two, when there’s that coin flip again for people. So hopefully they see the light and would consider doing a thorough background check it really, it really justifies itself with the actual numbers.

Nathan (5m 19s):
Yeah, that’s really significant. And the, one of the one numbers that struck me earlier that you mentioned was, I think you said 74% of the people surveyed said they, they had hired, they had brought on a bad hire and that, that would have been caught with a background check that’s that, that that’s a huge portion of, you know, again, it’s just of the people surveyed, but a huge 74%, that’s a huge portion of, of businesses. You know, I would think that any business owner that is currently looking to hire, you know, they are either somebody that has already experienced this and, you know, should know better by now to, to, to vet their employees properly. Or if it hasn’t happened to you, that probably means that it, it it’s coming and you know, that you should be, you know, wary of just, you know, not even where, where is not even the right word, but just, you know, making sure that you have all the information

Phil (6m 10s):
It’s so true. And again, like you said, it’s just simply the numbers. I know we have a lot of good recruiting companies that I know you’re affiliated with with quite a few or know, quite a few on the shows here. And they do great work, but to me, we’re a separate agencies. We don’t have any connection to the person, which is really important sort of separation of church and state. But to me, I have no horse in the race. We just want to do a thorough background check where we’re independent, which is what you want to have and, and clear set of, of honest reporting back to you. So that there’s, there’s no confusion or, you know, connection to the person. It’s simply a, another person that we’re going over.

Nathan (6m 45s):
Yeah. And I know you’ve said before that you work with these recruiting agencies, you know, you’re not working against them. You’re not, you’re not their enemy. You’re just working with them and giving all parties more information.

Phil (6m 56s):
Yeah. I’m glad you mentioned that because there was a time in my industry. I’ve been at it so long where there was sort of a pushback where the recruiting companies where they’d be like, no, we don’t need your service. We do our own vetting. We, we, we do. But I think things blew up. And again, if you become friends with someone, you want to place them. If I’m friends with Nathan, you know, your, your priorities change where I, I’m not their friend, I’m not their enemy. I’m just strictly going to do the most thorough job for my client. That’s who I work for. And if things don’t make sense, instead of a friendly relationship, I’m going to go and find out why exactly they left the job for a less paying job and why, you know, they left that last job and talk to the supervisor and find out it wasn’t a reduction of workforce that they just had attendance problems.

Phil (7m 39s):
That’s a different story. Yeah.

Nathan (7m 40s):
And you guys have the, the thoroughness and the expertise, you know, we’ve talked in the past about how, you know, it could be different regulations in different states that allow you to see this or that or where you have to go for different things. You know, you’ve talked about how you and your team will actually go down to the courthouse as necessary. You know, there’s a variety of different needs for different situations and your team is specialized for that.

Phil (8m 9s):
Absolutely. It’s so very important. Each state has their own rules and regulations. A court search is so much more necessary than a database search, which are usually in admissible and have fragmented information and partial information. And any screening company that is chosen by by a company should be a member of the PBS, say the professional background screening association, which we are. And if they’re not, then, then you should move on right away from that, that search and not use that company.

Nathan (8m 36s):
Yeah. And these, these different things can, can, can make a big difference. You know, as you, again, you’ve talked to us about, on this show, people that have maybe hired in Massachusetts and you do a background check that you know, or their recruiter just does a quick background check in Massachusetts, nothing comes up, but you know, somebody like you does a more thorough search finds out, oh, New Hampshire, Connecticut, Rhode Island, Texas, wherever they’ve got all these other issues that did not come up on a, on a Massachusetts one.

Phil (9m 5s):
Exactly. Nathan. And usually it is what, let me do surface criminal history. It many times is not where they are. It’s where they used to be or where they were two or three addresses ago. And that’s why they’re no longer there. We just had one this week, which was a Massachusetts person for the last four or five years. But the previous history in Texas showed many criminal records amazing that he was still not even in jail. So again, it was the past, not, not presently, we’re where he was located, which was, which was a negative situation.

Nathan (9m 37s):
Hmm. Very interesting. Now I know you’ve as usual got some anecdotes to share with us, is that correct?

Phil (9m 43s):
We have a sort of superstar of famous our company, person of being fraudulent. And I surely didn’t know the name. I’m sure our listeners wouldn’t as well, but it’s David Tovar. He was the former VP of a little company called Walmart. So he was the VP of corporate communications, huge job. And this came out Nathan, which I think is very interesting when he was actually getting promoted to even a higher position within Walmart. But in September of 2014, again, he was the VP of corporate communications. He had to be, we had to resign from the company I’ve since discovered that he did not have his bachelor of arts degree from the university of Delaware, as he claimed the New York times reported. And I, and I loved his explanation. He said at the time I have to read this closely Nathan cause it’s little confusing.

Phil (10m 25s):
He said, I definitely didn’t disclose that I didn’t have a degree. And there were times when it was probably an error of omission, I think. So it sounds like he was a little vague on it, even, even when he was caught, but outside of his injury, I mean, he is a huge brand name, a big black eye to Walmart, to their brand and for the person, a huge issue. I’m sure if they found out initially they could have moved in another direction and not have that situation embarrass them.

Nathan (10m 58s):
Yeah. Well in a Walmart while they are a massive company, of course, I think that they’re at their heart and core. They, you know, they’re a family that runs it and not to point any fingers at any family businesses. But I I’ve, I believe that, you know, a lot of families, businesses, which make up the majority of businesses in this country, sort of run things based on their, their own opinions of people. You know, they, if they like somebody, if the family likes somebody, if enough family members like somebody, then that’s more of, what’s going to get them the position then than really anything else. But again, they should be wary of these people that get in and, and get them to like you.

Nathan (11m 38s):
And, but turns out that they’re, they’ve got something to hide or they’re not being truthful about everything.

Phil (11m 43s):
It’s a great point, Nathan cause the old handshake before COVID right. We just put the handshake here and they believe in them. We have a lot of family owned businesses as clients and actually end up enjoying our service because they still stay that way. They stay the nice person with the handshake. It’s us. It’s sort of the person in the shadows. It’s that screening company of things arise. It’s like, it’s not us. You know, we have a great rapport. We love you. You’re the best you’re going to be great. It’s those screening guides and that’s us. We love to take on that role. Those are the ones who said, oh, look, you’d lied about your degree. Look, you didn’t work the five years, like you said, or had that title, you know, sort of falls on us and gives them the out to go like no harm, no foul. We still think the best of you, but we have to move in another direction because of the screening agencies.

Phil (12m 25s):
So we liked that role and it works well for our clients. For sure.

Nathan (12m 29s):
That’s a great point. You know, you can let The Hire Authority be sort of the bouncer at the door so that they can continue to run a good honest establishment inside. And Phil here we’ll, we’ll keep all the bad actors out.

Phil (12m 43s):
Absolutely, absolutely. That’s what we’re here for Nathan without a doubt and are done in three business days. I get that a lot to other people who have time to turn, I’m gonna lose somebody three days. Just give us three days. You get the full background back to you and you’re not going to lose any time in your recruiting process. It’s has to be quick. So we’re well aware of that.

Nathan (12m 59s):
That’s excellent. That’s something that’s very important too. Well, Phil, I want to thank you for joining us again here on Radio Entrepreneurs. Your segments are always highly insightful and you know, hopefully are getting business owners to be really thinking about their hiring process. A little more in depth. If people want to reach out to you, think about how they can utilize your services, what’s the best way for them to reach you.

Phil (13m 21s):
The office number here in Massachusetts, Nathan is 5 0 8 2 3 0 5 9 0 1. Toll free is 8 8 8 2 3 8 5 9 0 1. And we’re right there on the internet as well. Under higher off.com. That’s H I R E a U T h.com. And most times you could get a person with your first calls. So there’s no, no delay at all reaching anyone.

Nathan (13m 41s):
I can corroborate to that. Anytime I need to reach Phil and I call in through the office, I get a, I get a phone, you know, get answered right away. And they direct me. Right, right on over to who I need to talk to. So they’re very excellent that way. Want to thank you again for joining and remind our listeners that you can, of course find Phil Sharkey on our website. He joins us regularly. That’s on Radio Entrepreneurs dot com, but of course on all the other platforms we stream on YouTube, iTunes, Spotify, Google play. We’re also on Facebook and LinkedIn Twitter as well. Pretty much if there’s a platform out there where we’re on it for the most part. And so you can find us at Radio Entrepreneurs dot com or if it’s Twitter, a biz on the radio is where we are there.

Nathan (14m 22s):
I want to thank everyone for joining us and we’ll be back with more on Radio Entrepreneurs.