What’s your success rate with new hires?” I asked Ron (not his real name).

What do you mean ‘success rate’?” he asked.

Out of 10 hires you make how many of them would you call a success, meaning six or twelve months later you’re still happy with the hire that you made?

Ron paused a moment, looking very uncomfortable. “You know, I’ve never asked myself that question, I’m not totally sure, but if I was being brutally honest, maybe around 40 percent were successful hires, the rest either we had to fire or they left the company before the end of their first year.

Think of that for a moment. Six out of ten of Ron’s hires were poor ones. And if my access leading North America’s leading business coaching company has taught me anything–this is the status quo for most companies.

Yet what is the cost of a bad hire? Think of all the interview hours, and orientation days, and the disruption to your business. According to a study by the Society for Human Resource Management, a bad hire could cost your company up to 5 times your bad hire’s annual salary. And Harvard Business Review shared that up to 80 percent of employee turnover is caused to poor hiring practices and decisions.

Here in one place is a my favorite 5-step system to hire right. When you follow these five steps you radically increase your odds of making a successful hire. Does it take more work than just placing an ad and hiring off your gut? Of course, but when you consider the real costs of a bad hire it’s an investment well worth the time and energy.

Step #1: Determine, in writing, exactly who you need and what they’ll do for you.

List out:

  • The tasks and responsibilities of this new hire.
  • The experience set you want them to have.
  • The qualities you’re seeking in this person.
  • The values this person must embrace.

Then summarize your list of desired experiences, qualities, and values into your 3-5 “Must Haves”. What are the 3-5 must have qualities, experiences, or traits for this new hire to be successful in this role for your company?

Congratulations, this simple step not only will increase your odds of success in interviewing for your “must haves”, but you’ve now got a mini “score card” against which to grade every applicant you consider. Don’t be swayed by bells and whistles, hire for your must haves. Let your must haves dominate your hiring process.

Step #2: Create and follow your recruiting game plan

Your recruiting game plan includes the following:

  • An appealing, well-written “help wanted” ad for the position. If it’s for an operational position, include clear and concrete details of exactly what you’re seeking. If it’s for a sales/marketing position, make sure your ad is short and concise. I suggest you have applicants respond by emailing a rsum, cover letter, and salary history. This allows you to quickly do a first-pass screen and save time, plus you learn a lot about the earnings range for the position.
  • Determine if you already have someone on your team who fits what you’re looking for. After all, why wouldn’t you want to give an existing team member who fits your must haves a chance at the opportunity? Many companies overlook their own existing team.
  • Spread the word among those in your extended network and share your “help wanted” ad with them. Ask your team to do the same. Some of my best hires were referred to me by my existing team members.
  • List your ad online. Find the best sites to post your ad for your area, industry, and the position itself.
  • Create a list of companies in which you’d find your ideal candidate and call people you think might be a potential match. Ask if they know of anyone like themselves who might be interested in the job. (Many will have a good network and some may even be interested in the position themselves.) This simple yet powerful technique is used by many professional recruiters.
  • Use online social networks like LinkedIn.com to find potential candidates.
  • Consider hiring a recruiting company to help find the right person. Although it’s the most “expensive” option on the surface, if the position is a critical one, or if you’re company is not skilled at recruiting, it’s often the fastest, least time intensive and most cost effective solution.

Step #3: Review your candidate pool and do a 3-step interview process to find your top three candidates for your final interview(s).

One: Quickly sort candidates via rsums, cover letters, and salary histories. Grade them A, B, and C. Toss every application who isn’t an “A” into your shred folder. Don’t even waste a moment of your time on them.

Two: Phone screen the top 8 to 12 “resume” candidates. This can be done by you or someone on your team. Your goal is to quickly pare this list down to 5-6 strong candidates whom you’ll do a more detailed phone screen with.

Three: Conduct an in-depth phone interview with the top 5 or 6 candidates and select three to meet in person. Confirm that all three are very strong on your “must haves” (we grade our applicants on each of the must haves on a scale of 1-10 so we can more easily compare them.) Also, confirm that each of the three considers your company and your job opportunity their number one choice before you commit to making them a finalist.

“Paul, as I explained earlier in this process, our goal is to narrow our search down to the final three top candidates for the position. It’s been tough to do considering how many applicants want the position. And I think you may be one of the top three. Now Paul, before I give you one of the three “finalist” spots I just want to make sure, is this a position that you know you want? I know we still have to talk through compensation and all that, but assuming it’s fair for the position, is this an opportunity that you want and are we the company you want to be part of? If not, please tell me and we’ll go another direction for the final three spots… Great to hear Paul, tell me, what are you top reasons for choosing us?”

There is a lot going on in that scripting. I encourage you to go back and read through it a second and third time. Whatever you do, don’t allow an applicant to be one of your final three candidates without clearly confirming to you that they want the position. Is this legally binding? Of course not, but it is a critical psychological commitment and an essential protection from you wasting your time.

Step #4: Interview in depth your three finalists.

You may decide to do more than one in-person interview. Take your time and get to know your top candidates before making your final choice.

I strongly suggest you do this interview(s) with one or two other people participating. This allows you to observe more and worry less about questions to ask.

Plan your questions in advance along with who will do the asking and roughly when. Use this list of questions as a skeleton for how the interview will go, leaving space for other lines of questions that come up during the interview. (Save your interview structure as a template to use for your hiring system.)

After each interview, debrief your interview team about the candidate. What were his or her strengths? Weaknesses? How did he or she rate on a scale of 1-10 on the three to five “must have” qualities or experience sets for the position? You’ll find it gets hard to remember candidate one when you’re talking with candidate three two days later, so take detailed notes.

Step #5: Hire your winning person.

Once you’ve found your key team member, bring that person up to speed and transition him or her to take over that key area of your business. (Remember, the process is not over until you have successfully on boarded your new hire.)

Stay focused on setting up your new team member to win. That means don’t just dump all responsibilities and run, nor micro-manage that person to death.

Gracefully transition your new hire into the role so that after three months, he or she has taken on 80 percent of the responsibilities and by six months, 90 to 95 percent. Within 12 months, your new team member should “own” the role entirely.

If you want to learn more about intelligently scaling your company, I’m about to teach a new webinar that will focus in large part how you can grow your business without sacrificing your health, family, or life to do it.

If you’d like to join me on this special webinar training, please just click here to learn the details and to register. (It’s free.)