It is vital for a company to hire the right people. For most businesses, an effective recruitment process does not only ensure the companies’ competitive advantages over that their competitors', but also prevent substantial losses from taking on board the wrong people.

For many companies, labor cost represents the majority of their expenditures. It costs a lot to hire and train new employees. If the recruitment process is not effective, those costs become sunk costs. The employers, then, have to spend even more for the firing process. Ineffective recruitment also introduces costs through the decisions that bad employees make. For example, Enron hired Jeff Skilling as its CEO. Under Skilling’s leadership, Enron got involved in a series of financial frauds and eventually went under. In practice, we many firms try to test the employees before making fulltime offers. For example, many investment banks, including Rothschild and BNP Paribas, only hire full-time analysts that had already interned for them.

In the current competitive economy, companies spend a lot of efforts to build sound corporate cultures. Effective recruitment is an important step in fostering a good culture. Bain & Company is a good example of effective recruitment. Bain’s interviews have two parts: a case study to test the candidate’s abilities, and a set of behavior questions to test his or her personality. Even if a candidate shows strong skills, but fails to express how he or she fits with Bain’s