Facebook’s $122 million fine from the EU for making misleading statements during its 2014 purchase of WhatsApp doesn’t look too damaging for a company that posted $8.03 billion in revenue last quarter.
That changes a little when you consider that the $122 million is just a line item that should be added to what is now a $19.12 billion tab for a single hiring mistake Facebook made eight years ago.
In the summer of 2009, the company rejected the job application of an unemployed software engineer named Brian Acton, who went to work on his friend’s fledgling messaging app instead. He raised $250,000 and was granted a stake in and the title of co-founder at the new company: WhatsApp.
There are many valid reasons why a talented applicant might not get a particular position. Acton may have been better suited to build things outside Facebook’s culture than within it. WhatsApp keeps quiet about the internal workings of its famously lean operation, and it’s unclear exactly what roles Acton took on as the company grew—his WhatsApp job title on LinkedIn is just “Brian Acton.” But Acton has been a key architect of the company’s product and strategy. Had Facebook hired Acton, he almost certainly wouldn’t have thrown his energy into WhatsApp at a crucial moment in the company’s history, or helped build the startup into a 420 million-user giant by the time Facebook acquired it.
Facebook’s mistake is what eShares CEO Henry Ward calls a human resources “false negative”—when a company passes on a candidate it should in fact have hired. In a Medium post last year, Ward wrote that companies worry unduly about “false positives,” or hiring employees that don’t work out. Better to take a chance on a candidate with tremendous talent and potential who doesn’t quite fit the job description, Ward argued, than a merely unobjectionable one with ideal past experience. The impact of a bad hire is quantifiable, while the value of passed-over candidates can’t be known.
Except in Facebook’s case, where the cost of not hiring Acton now stands at over $19 billion and counting.
“We should not be afraid of False Positives. We can quickly fix a False Positive hiring decision,” Ward wrote. “However, we should be afraid of False Negatives. We can never fix a False Negative mistake. And the cost is unknown and uncapped.”