Hiring a bad person is worse than passing on a good person. You have to optimize your interview process to account for this, and that means you will almost certainly pass on some good candidates.

Yes, to some extent you have to accept that you could end up passing on some candidates whom could have turned out to be good employees. Couple thoughts though: 1.) It's still only in hindsight that you could say something like that (ie. "wow that person really did turn out good") 2.) If you're still hiring good employees at a decent rate, does it matter? Short of being 100% efficient (which is an inappropriate goal anyways), you'd only need to address this if you were somehow not hiring anyone or hiring way below industry pace