The Cost of a Bad Hire

By Corey Hastings

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Time, effort, energy, and money – All the precious things you invest in hiring can come crashing down with one bad hire. Though no one intends to make a bad hire, the reality is that it happens. And it will cost you in many more ways than one.

Taking time to understand your miscalculations is the first step to ensure you don’t get caught with the wrong employee again. We’ve compiled the costs, financially and beyond, that you incur when a bad hire is made to help you understand how to avoid similar mistakes in the future.

Loss of productivity & retention

In a survey conducted by CareerBuilder.com, 41% of companies worldwide said they lost worker productivity with a bad hire. A mis-hire can result in not only a loss of productivity for their specific department, but can negatively impact the productivity of the company as a whole. Whether they’re in a leadership role or not, a bad hire will bring the morale of the whole team down if they can’t properly execute responsibilities, or don’t fit in with your specific culture.

With the negative impact on their work environment, great employees may leave due to a bad hire. Establishing a thriving company culture is vital to any company’s success, and is highly dependent on the camaraderie and work ethic amongst employees. If a new employee is bringing the team down, jaded employees will seek other opportunities, resulting in turnover and potential jeopardization of your reputation.

To ensure you’re bringing on the right hire, know your team and how they operate, inside and out. Include them in your initial conversation about the open position’s required roles and responsibilities, and bring this knowledge to the conversation when interviewing. If you’re transparent and honest about what you’re looking for, the right candidate will do the same. By managing expectations up front, you’ll have less room for error.

Financial losses

The financial losses of hiring a bad employee are, quite honestly, staggering. The amount of factors that a bad hire impacts, direct and indirect, add up to more than you may believe.

Direct factors, including hiring costs, compensation, and severance are obvious losses. But indirect factors you may not have accounted for can add up. These indirect factors can include support costs, like office space, expenses, and the HR department’s time. The cost of poor performance, including poor execution, missed opportunities and potential lawsuits, are also on the table, as well as the cost of potential turnover due to low company morale.

According to research conducted by SS&C’s Joe Vona, Sr., the net average of the bad hire can result in a loss of up to 14.6 times the base compensation.

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The next time you’re in a rush to hire, take a step back and look at all the factors that affect the numbers. While your decision may be urgent, you’ll save more than just money by taking the proper time and effort you need to find the best candidate for the job.

Looking to make your next great hire? Let us help.

 

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