October 1, 2021

How a Bad Hire Costs More than Money

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.

What Is The Cost Of A Lousy Hire?

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:

  1. Delays in projects and processes associated with the departure of an employee
  2. Productivity
  3. Spending on recruiting, onboarding, and training a new employee
  4. Atmosphere deterioration within the company and individual teams
  5. Dealing with stress due to an employee leaving
  6. Resolving legal and personnel disputes

How To Avoid Negative Hiring Outcomes? 

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: 

  1. Why do you have this vacancy? Is it a replacement for a temporarily absent employee, laid off or on maternity leave, or is it a new position? Find out how the vacancy came to be - this will help to find a suitable candidate.
  2. How do you see the company's future? Try to objectively assess the state of the company and determine what changes await it in the near future. This will help you understand if you have chosen the right moment to hire someone new. 
  3. How do you see the internal organization of the company? It is necessary to take into account things like the company's activities, the secrets of its success, or its reasons for failure.
  4. Are employees aware of your search for a new specialist? It is better to inform employees about the vacancy. This will make the procedure more transparent to every participant. Some employees may even recommend suitable candidates or will want to try to take the position themselves.
  5. How much time can you devote to finding the right employee? Contacting a recruiting agency can be a good but time-consuming solution. If you are lacking time, you might want to consider methods for recruitment assistance such as combining positions.
  6. What will be the responsibilities of the new employee? Having figured out the context for recruiting, you need to decide what responsibilities the new team member will perform. To do this, you need to know if the role is new or just filling an existing vacancy, and what the employee's prospects for this position are. And consider how well you understand what you are looking for.
  7. What kind of employment do you need? Is it part-time or are you looking for a full-time specialist? Maybe the role is a better fit for a freelancer?
  8. Is it possible to distribute responsibilities within the company? Often, tasks can be effectively distributed among company employees. For them, an increase in the volume of work can be a positive new experience, an opportunity to acquire additional professional skills, and monetary compensation.

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.

Shad Paterson
About author
Shad's been a digital nomad since he was 16, living and working remotely. After working in marketing and selling crap to people constantly, he decided to change his life and do something good. Now he helps other people transform their lives, by landing them high-paying jobs across the world.
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