Firms shouldn't spend more time and effort buying software than hiring people

Here's something that's always puzzled me about the cautious, analytical people who tend to run accounting firms.

They will spend months selecting a $100,000 piece of equipment or agonizing over a $3,000 per month software subscription. Yet they'll be pretty casual about hiring a $100,000 per year employee, when the cost of hiring the wrong person is likely higher than a bad software decision. 

Firms understand that software vendors are incentivized to present the best possible version of their product, so they build systems to verify performance independently before committing capital.

Accounting job candidates are no different than software vendors. They always want to put their best foot forward. Yet when it comes to hiring, many firms still mistake confidence and experience for competence. 

There are four steps in the capital acquisition process:

1. Define the need.
2. Evaluate options.
3. Verify claims.
4. Implement.

Hiring should follow the same rigor, yet firms routinely skip Step 3, and are often average, at best, with Step 4. 

Two $100,000 decisions

Accounting firms routinely apply structured diligence when selecting practice management software, tax workflow tools or research platforms. Even relatively modest technology investments often involve demonstrations, stakeholder consultation, implementation planning, workflow testing, reference checks and ROI analysis.

Firms understand that software vendors present polished, carefully curated versions of their products, so they verify the claims before committing. Yet hiring decisions that carry similar financial impact are often made through a handful of unstructured interviews and subjective impressions. In effect, firms apply "trust but verify" to software procurement, but only "trust and hope" to hiring. 

"Hire and hope"

A failed tech implementation is unlikely to destroy your firm even though it can create months of inefficiency, lost productivity, staff frustration and significant sunk cost. But in most cases, you can unwind it or replace it. 

But when a hire goes wrong, the cost of a bad hire can be astronomical and,

• You lose salary and productivity. 
• You damage team morale. 
• You incur replacement and rehiring costs. 
• You risk client relationships. 
• You absorb leadership time fixing the problem. 

For example, a firm hired a senior accountant for $130,000. He was fully qualified with eight years of relevant experience. But the firm never bothered to check his technical skills during the interview or via separate testing.

The end result? He lasted all of five months before being terminated. The hiring process failed to uncover that his "experience" was entirely at a low level both in tax and client complexity. And he had been using outdated technology at his most recent job. In reality his experience didn't match the length of time he'd spent in the profession, and the role he was given was beyond his capability.

That's what happens when you rely on a "hire-and-hope" model. When you consider that most U.S.-based hiring decisions have a total risk exposure of over $100,000, how can you depend on a process that is:

• Light on structure;
• Poorly documented;
• Biased;
• Subject to AI and gaming; and,
• Often based on gut feel. 

"Trust but verify"

One of the biggest gaps in the hiring process is how firms handle claims versus evidence (see Testing/Validation in the chart above).

In a procurement process, no firm would rely solely on what a vendor says. You expect polished demos, strong sales messaging and confident assurances, but that's just the starting point. From there, the process typically shifts to "trust but verify," which includes:

• Reference checks;
• Trial periods or pilots;
• Technical validation;
• Independent reviews; and,
• Proof of performance against real use cases. 

The goal is simple: Validate that what's promised by the vendor holds up in reality. Hiring, however, often stops at the equivalent of the sales pitch. Candidates present well-crafted resumes, rehearse interview answers and position their experience in the best possible light. And yet, instead of systematically verifying those claims, many firms rely on instinct about the candidate:

• "They seem sharp." 
• "Good cultural fit." 
• "I liked them." 

In other words, the process becomes "trust" without the "verify."  And yet we know verification in hiring leads to better outcomes, as shown in this 1998 academic study. And the tools to verify candidates are far more accessible than ever before. Work-based assessments, structured testing and objective benchmarks are gaining adoption, but they are still underutilized.

If firms applied the same discipline to hiring that they do to procurement they wouldn't simply ask: "Do we believe this person?" They would ask, "How do we know?"

What does this teach us?

Firms understand that software demos are curated sales experiences, so they verify the claims through trials, references, workflow testing and implementation planning. Job interviews are equally curated — but many firms stop at the demo.

Firms don't lack discipline in general. They apply discipline every day to clients, to finances and to technology decisions, but not to hiring. Hiring hasn't been treated as an operational investment decision at most firms. But it should be because the biggest risk to your firm isn't the software you choose.

It's the people you hire.