Buying a house is a huge investment. I’m beginning to realize just how big of an investment is in my search for a house. One of the other things that I’ve quickly learned is that it is definitely a seller’s market in Pittsburgh. For one of the houses I was interested in, it came on the market, had its first open showing on Saturday, and had multiple offers by that Saturday evening. I was blown away by how fast the process was. If you are not constantly monitoring Zillow, you’ll lose out! I have continued to notice that houses in some neighborhoods won’t stay on the market for more than a few days.
One of the major factors driving the “seller’s market” is the number of houses downtown compared to the number of people looking for a house. Meaning, the need is far outweighing the inventory. As such, the scarcity effect comes into play. This is the idea that scarce products are more appealing. While this is typically used as a selling technique in marketing, we can also see come out naturally in these situations. This can become problematic because our emotions can lead us to make an irrational decision – we purchase something because we’re afraid we won’t have an opportunity for another one in the future, despite it not fully meeting our expectations set.
What does this have to do with hiring?
This same type of situation happens often when hiring. In a tight job market where we don’t have a large candidate pool, we can experience a similar fear of scarcity. Job candidates have the upper hand because there are a lot of open positions and not enough candidates to fill those positions. In this case, the fear of scarcity may actually be warranted, but we may not always be acting rationally when considering candidates.
When there are few candidates to choose from or when we feel an urgency to backfill a position today (or in reality, 3 weeks ago), we oftentimes are susceptible to “settling.” This sense of scarcity that we need to take any candidate that is living and breathing can create large problems down the road.
If we settle for candidates who do not meet standards across all skills and abilities necessary for the job, then we are left with a subpar performer who isn’t helping the bottom line. Not only are they not meeting performance expectations, but they could be negatively affecting any customers they are directly working with or could be taking away valuable time from managers or coworkers from misused time. The implications are big.
Studies by the Harvard Business Review & Society for Human Resources Management found that the cost of a poor hire is 3-5 times an employee’s annual compensation. As an example, for an employee earning $50,000, a hiring mistake can cost the company up to $250,000. Ten hiring mistakes can cost $2.5 million.
Stick to your standards!
As can be seen, selecting a candidate for a job position is a huge investment. It’s not something that you would want to take lightly. Therefore, in these tight markets, it’s important to recognize that we are inclined to settle. Additionally, it’s even more critical in these situations to have a well-laid out selection process and use it consistently. Make sure that you are assessing the candidates on the critical knowledge, skills, and abilities needed for the job. Hold to the standards you set. Take as much subjectivity out of the process as possible by incorporating assessments. Assessments can be your objective barometer to determine whether the candidates meets expectations. This can help you to avoid settling with a candidate.
Just like buying a house, the ramifications for making a risky and unwise decision are large. I do not want to be stuck with a house that is not going to meet my needs but still will continue to take money away from me. We don’t want that from new hires either. Those poor hires may be filling the position in a physical sense, but they probably aren’t measuring up to a more qualified candidate you would have chosen if you didn’t feel this pressure. So, take your time in hiring and don’t let the pressure to fill the position overtake you and lead you to settle for a candidate. I know I will be heeding this advice as I continue looking for a house!