The U.S. Department of Labor asserts that the common cost of a single inadequate hire is about 30% of that hire's one-year income. So if you end up choosing that pesky Negative Nancy who was set to make $250,000 a year - then your company could stand to lose around $75,000 over the course of realizing that this person isn’t right for the role.
Financial losses are just one reason why the process of searching for and hiring an employee should be as balanced as possible.
If your HR department has a history of selecting candidates that often end up not working out, things such as productivity slumps, time lost, a hostile team environment, and a deteriorating customer experience are sure to follow.
Let’s figure out what the real cost of a bad hire is and how to avoid such destructive outcomes for your company.
Hiring errors are critical hazards for every company. The negative outcomes that follow in their wake often include:
Wasted money. Yes, as we have already noted, a bad hire equals bad financial outcomes for your company. To shed a little more light, let’s say that about 3/4 of businesses who employed a bad hire reported a median of $14,900 wasted. In contrast, the average cost of losing a good candidate is nearly $30,000.
Wasted time. 34% of financial executives say that poor hires decrease team productivity. But another problem is that team leads have to spend about 17% of their time managing poorly-performing employees (this is an entire workday!).
Decaying corporate culture. Having a team member who doesn’t actually care about your company, product, and team, is one of the main factors contributing to employee depression. A bad hire can disrupt the dynamic of a team and cause a 32% drop in employee morale.
Damaged reputation and relations with clients. If an employee is underperforming or bringing a negative attitude into the working environment - your customers will feel this. How? Well, good news travels fast and bad news travels faster. Once you fire unproductive employees - they may write a review about you as an employer. A very bad employer, of course.
According to research, the most damage inflicted on a company’s finances occurs because of increased staff turnover within the following processes:
The safest way to deal with lousy hiring is to be more scrupulous in your hiring decision from the outset. Be mindful of who you are booking and consider the protection of your company's culture above all.
Pay attention to recruiting context. Assess the needs of the company. Ask yourself the following questions:
Searching for a new employee is always going to demand some research and planning in order to avoid hiring a Debbie Downer. There’s just too much at stake.
The procedure for hiring should be based on honesty and the clear intentions of both the employer and the employee in order to avoid future dismissal because "We couldn’t agree on anything!"
Determining what kind of employee is actually needed isn’t as easy as it sounds. Since the recruiting process is rarely confidential, it might make sense to contact a recruiting agency. Specialists can audit your expectations and requirements for a new employee and determine which specialist best matches this profile.
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