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Hiring is hard. Based on my own experience and talking to others, I take some solace in the fact that even the best still never get it right every time. I would hazard to guess it's like baseball, where if you're batting .300 that's still pretty damn good.
Is it possible the terms of the contract may have skewed the outcome? In other words, were candidates less motivated to give their best effort because the outcome was uncertain? In your defense, I also would expect people to do their absolute best to secure the best chance of landing the full-time job, but it sounds like the uncertainty led some people to keep one foot out the door so to speak, and keep exploring other options for themselves as a hedge. It makes a lot of sense but I would not have factored that in ahead of time if I had been in your shoes.
Some of this reminds me of the behavior of consultants, where making short-term wins usually takes priority over the long-term goals of the client. And while a consultant always has an eye on selling more work to the client long-term, the reality is they'll always be playing the field for the best opportunity available.
One question: did you use references at all? In my experience that has usually been the most valuable source of info for making a hiring decision.
Such an interesting account, thanks so much for sharing.