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What Is The True Cost of a Bad Hire?

Bad hires cost businesses both time and money. To put some figures on these poor recruitment decisions, the US Department of Labor reports that a bad hire will cost a firm at least a third of their first year’s salary.

However business leaders have called that figure a low-ball estimate with Zappos CEO Tony Hseih readily admitting that bad hires have cost his company well over $100 million.

But where do these astronomical costs come from? Why does hiring a poor candidate carry such a high financial penalty?

 

Time Salaried Employee Allocates to the Search

Before your new hire even sets foot into your business they have already cost you a great deal. Particularly if those involved in the selection process are in business-critical roles.

For example, let’s say you need the input of your accounting manager in the search for a new staff accountant. With the accounting manager’s salary standing at $85,000, and the average search for a new employee taking 3-4 weeks, it isn’t hard to see how the costs already start to mount up.

They could have spent those 4 weeks on vital accounting duties instead of looking for a new candidate. You could potentially be looking at spending the best part of $7,000 in gross wage costs on assessing applicants rather than having them carrying out necessary accounting duties.

 

Time Invested into Training and Development

Onboarding and training is commonplace for nearly all positions, but what about the cost of investing those resources into a bad recruit?

Firstly, you’re never going to see that investment return if your new employee is a bad recruit. Secondly, the productivity loss from those employees carrying out the training in addition to their usual responsibilities are going to negatively impact business performance.

That’s why it’s crucial to ascertain whether or not a new recruit is going to work out early on in the process. Because if you’ve invested over 2 years of training and development into this individual, just think about the financial cost of those invested resources that you, as a company, are never going to get back if they are a poor choice of candidate.

 

Bad Hires Upset the Workplace Community

Not only can bad hires become a black hole for training and development resources, but they can also have a negative impact on their colleagues.

If you hire someone that fails to assimilate to your business’s culture and values, then you have simply bought yourself a one-way ticket to inner turmoil. A bad hire can quickly turn a workplace toxic, causing unnecessary distraction, losses of focus, and lowering staff morale.

In worst case scenarios their arrival can skyrocket employee attrition rates, causing your recruitment costs to soar even further.

So what can you do as a company to ensure a bad hire doesn’t derail your growth and company culture?

 

How to Prevent Bad Hires

When it comes to ensuring you land the correct candidate for your vacant position, there’s isn’t a one-size-fits-all approach.

However, there are a number of tried and tested methods to significantly reduce the chances of making the wrong decision. Make a start by implementing the STAR approach to interviews.

 

STAR Approach to Interviews

Short for Situation, Task, Action, and Result, STAR-based questions will unravel exactly how a candidate thinks in certain situations.

As just mentioned, cultural fit is one of the most important factors when making sure that a prospective candidate is right for a role. By asking STAR-style questions, you will have an accurate foreshadowing of how a recruit will react to certain situations.

It’s a great way to differentiate candidates who have similar ability levels, and any answers that don’t sound like the behavior you associate with your current crop of employees is sure to set alarm bells ringing.

 

References Should Never Be an Afterthought

So many companies make the mistake of not thoroughly checking the references of their hires. Without proper verification how can you be sure that the person is who they appear to be?

Candidates are often great at presenting one version of themselves at interview before revealing a dissimilar personality upon arrival and integration.

When following up with references, be sure to speak to managers (instead of peers) and get to the bottom of how they like to operate. Pull no punches with your questions, and try and uncover the real reasons behind why they left their previous employer.

These conversations can help you greatly when it comes to managing them moving forward. In other cases, these reference follow-ups can cause sufficient concern to withdraw an offer for employment completely, so it’s imperative that you complete them correctly.

Lastly, always make sure to complete a full and through background check too, as previous employers may be oblivious to any other possible skeletons in a candidate’s closet.

 

Use a Reliable Recruiting Service

One of the easiest ways to avoid of all the unnecessary costs associated with a bad hire is to outsource the recruitment process to a trusted provider.

By doing so, you can keep pivotal employees focused on their roles and not have to worry about carrying out thorough background and reference verification checks since these are all done for you.

By outsourcing recruitment, your company can continue functioning as if it were any other normal business day, completing projects and tasks that are crucial to the type of growth that’s seen you need to hire new faces in the first place.

 

Get Expert Help with Your Recruiting

Bad hires are potentially disastrous for your company, with the worst examples becoming an endless black hole of wasted investment and resources.

That’s why we put so much time into our candidates to assess not just their skillsets, but how well-matched they are to the culture and values of your company.

In fact, we place so much faith in our own recruiting processes that we guarantee ALL of our candidate placements. So if one of our recruits doesn’t work out for you for any reason, you’re not on the hook.

So if you can’t afford to make any mistakes with your next hire, don’t hesitate to call our team on 305-910-2524 to discuss your recruiting requirements.

 

Farley Ashby

Founder, Offer Accept

Recruiting Expert