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The true costs of a bad hire

Today I would like to tell you a story of a a perfect world, where employers would be able to hire people based on their merits alone and never have to worry about the repercussions of a potentially bad hire. Exactly this is a story, reality show us, since people are people, with idiosyncrasies that are hard to ferret out in a 30-45-minutes interview, we will all occasionally make a bad hire. Sounds sad, is not it?

So let’s talk about the true costs of a bad hire….Unlikely this Is not only the amount of money you might have spent advertising the position or paying an agency/recruiter….Unfortunately, making a bad hire can impact your revenue, your clients, your other employees and you in a variety of ways.

In addition, once the bad hire has been resolved, the recruitment process has to be repeated, incurring more costs and internal time. Any training and development spent on the outgoing employee will also be lost, and then there is training and development on the replacement employee, which will need to be undertaken.

There is also another important issue: increasingly, people are being dismissed because of their behavior rather than capability, so a good all-round fit is essential. Even a seemingly ‘right’ candidate who does not get on well with his or her colleagues could prove detrimental to a business. In today’s competitive marketplace, businesses need to make sure they get value for money in everything they do.

The cost implications of recruiting the wrong person are extremely high.  Surveys show that recruiting the wrong person can cost a Company 2 ½ times the basic annual salary of the employee, but cost can be much higher.

Let’s examine some of the more intangible costs of a bad hire and find ways to avoid making this costly mistake.

1. Productivity: this might be one of the hardest costs to quantify, but it could also be the most impactful. If an employee is not well suited for the job, has a bad attitude or is simply incompetent, the time they spend not working could significantly affect your bottom line.

2. Client Relationships: while your client relationships should be strong enough to withstand a bad hire, there is definitely a negative connotation to high turnover in roles where people are interacting with clients. It may give your clients the impression that your business is not stable if they feel they are talking to different contacts every week.

3. Additional Supervision: employers polled also stated that a bad hire forces supervisors to spend 18% more time overseeing the employee’s work, as opposed to doing other tasks. This could mean taking high-level employees away from revenue-generating activities and employee mentorships in order to focus on coaching under-performers.

4. Employee Morale: a bad hire negatively affected workplace morale. If you run a small company, this negativity can quickly spread and make coming to work a chore for your valuable employees as well.

5. Revenue: at the end of the day, the biggest costs of a bad hire involve the revenues that he or she is not generating. By not being able to perform the job, close the sale or manage the process, this employee is costing you money.

Obvious? Many companies do not consider such intangible effect of bad hire until it is happen; this is why it is important to invest in the recruitment process up front.  Not only does employing the wrong person have serious financial implications, but it can also have an impact on other staff, and the organization and their brand as a whole.

Here are five top tips to get recruitment right:

  1. Don’t Rush !!! While you may feel that business needs dictate immediately hiring someone for an open position, keep in mind what you might sacrifice by hiring the wrong person Also, there are added costs of hiring a second employee and re-training him or her if you make the wrong decision the first time. 
  2. Quality over quantity: advertising a position on every jobsite may gain you a large pool of candidates, but most of them will not be ideal. A candidate who is the best of a poor bunch does not make them a good candidate. Instead, advertise a position on your web alone, and the candidates you attract will be the ones displaying an initiative to check specifically for your company. This work of course with ‘active’ candidates, the bad news is that best candidate often are ‘passive’ candidate, simply they are not looking for a job. That is why the role of professional recruiter or head-hunter is to find the niche candidate and present the challenge and the role with transparency, details and with all kind of information that can turn on the interest of the candidate toward the position.
  3. A good interviewer does not necessarily make a good worker: Seems obvious but our prime judgment of how well someone would do a job is to measure how well he or she talk. This may require further tests to assess how well a candidate could perform daily tasks. Think about some of history’s greatest innovators – Albert Einstein, Steve Jobs, Richard Branson – it would be hard to imagine they would perform well in most interviews.
  4. Try them: one of your best options for really determining if a hire is the right fit is to bring them on board for a short-term assignment. It may take some upfront negotiation, but see how open the candidate might be to give the job a test drive. It is best to bring them on for a short-term assignment or project, as this will give you a chance to assess their abilities very closely.
  5. Check References: in many cases, references, especially professional references, are the best chances you have at gauging whether someone can perform the job in question and when speaking to those references, ask the right questions:  “If you had the chance, would you hire this person again?”