cost of a bad hire

The high cost of a bad hire – and how to avoid it

Bad hires are an incredibly common problem in the business world. And they impact businesses in more ways than you might think – both monetarily and non-monetarily. You may be surprised to discover how quickly the cost of a bad hire adds up and how prevalent the issue is.

Consider these results of a 2017 CareerBuilder survey:

  • The average cost of one bad hire is nearly $15,000, factoring in the recruiting, interviewing and selection process; training; and salary.
  • Two in three workers have accepted a job that they later realized was a poor fit. Half of these workers quit within six months, causing their employers to start all over again with filling the position.
  • 74 percent of employers say they’ve made a bad hiring decision.

Defining a “bad hire”

Who exactly are we talking about when we reference bad hires?

Common qualities associated with bad hires include people who:

  • Misrepresent their skills or knowledge during the recruiting and interview phases
  • Fail to meet minimum standards for performance and quality of work
  • Immediately want to discuss PTO and other benefits rather than their new role or the company – they’re clearly focused on themselves and how your company can help them, rather than the reverse
  • Lack commitment and engagement (ex., arrive late, leave early, take long lunch breaks)
  • Have a negative attitude – a particularly dangerous quality because negativity can be contagious in a workplace
  • Don’t fit within your workplace culture or struggle to get along with colleagues
  • Don’t have the right personality for the specific job they were hired for
  • Display poor judgment in making decisions

These qualities are usually obvious within a short period of time after a candidate accepts and begins a job with your company.

Hiring the right people is so incredibly important. After all, your people are what make your organization. When a new hire doesn’t work out, it can be very painful for your company.

Seven ways bad hires can cost you big time

1. Lost productivity

Employees who don’t have the necessary skills and know-how will struggle to pull their own weight. This can lead to costly errors and slow completion of work.

Although your managers should train new employees and help get them settled into their role, there comes a point when your workers should be able to do their job without ongoing oversight.

Whether it’s lack of skill, poor behavior or some combination, constantly meeting with workers to address performance issues takes up hours that could otherwise be devoted to running your business.

2. Lost time spent on recruiting and training

The recruiting process can be time consuming and lengthy. It includes these core tasks:

How long will this all take?

It depends on the position you’re trying to fill. A good rule of thumb is at least four to six weeks from when you start the recruiting process. However, it can take much longer to recruit for a specialized position requiring unique skills.

All the while, your position remains unfilled and you’re forced to shift your focus away from money-making activities.

Remember, recruiting your new employee is the only the first step to filling your position. After a candidate accepts your offer, they’ll likely need to give their current employer two weeks’ notice.

And when it’s finally time for them to join your team, you can’t just throw them into their new job. Even if they’re highly skilled and knowledgeable, with years of experience, they’ll probably still need some time to learn about your company’s processes, current projects and customers. Plan on spending at least a few weeks training your new employee.

If a new hire doesn’t work out, you’ve just wasted a lot of time.

3. High costs associated with recruiting and training

Downtime isn’t the only costly part of recruiting and training a new employee. You’ll also have to shell out cash each time you advertise on job boards, administer assessments and run background checks.

Perhaps a candidate isn’t local. You may have to fly them in for an interview – you may have to pay for airfare, transportation and hotel accommodations, too.

Training your new employee also comes with costs. You may need to create new training materials or pay for training courses. For on-the-job training, one of your employees – typically the hiring manager – can help your new hire get up to speed. Their salary is another expense.

4. Damage to employee morale and workplace culture

Confrontational or difficult workers are a major hindrance to your other employees. Personality clashes within your team can make for a stressful and distracting work environment. Skirmishes and gossip can make it hard for employees to focus on their work.

When bad employees drop the ball, your other employees are forced to pick up the slack. This can create resentment and bitterness among your workers, which results in a toxic environment.

The promise of not having to deal with a problem co-worker can encourage your other employees to leave. Widespread employee turnover is also incredibly costly to businesses.

5. Unhappy clients

Your clients have certain expectations of your business.

An ill-equipped employee can be either overwhelmed or underwhelmed by their job responsibilities and make mistakes, overlook critical details and provide poor customer service. Your clients won’t stick around if the quality of your product or service takes a nosedive.

And usually, bad hires only do the bare minimum. They won’t go out of their way to drum up new business, take advantage of opportunities to strengthen client relationships or make sure clients are satisfied with their service.

6. The ding to your company’s reputation

Think of your employees as ambassadors for your business to the outside world.

An employee who doesn’t represent your company well can repel prospective new clients, partners, vendors and other job applicants. They may see your employee behaving unprofessionally or lacking critical knowledge and think, I don’t want anything to do with this company if that type of person works there.

An increasingly prominent example of this is employee activity on social media sites, which can be a major headache for business leaders.

7. Exposure to liability

Depending on their role, bad hires can make your business vulnerable to legal action that could cost you – from both inside and outside your organization.

For example, an employee who lacks professionalism – behaving impulsively or inappropriately toward colleagues and clients – can get your company in trouble. Think sexual harassment lawsuits or violations of privacy, such as asking co-workers about medical information.

Employees who just can’t seem to grasp their job responsibilities and work processes, or who lack critical knowledge and experience, can also make costly mistakes or oversights that land your company in hot water.

Summing it all up

The cost of a bad hire is high and wide ranging, encompassing both monetary and non-monetary impacts to businesses.

Once you understand what a bad hire entails, the types of havoc they can wreak and what you can do to avoid this scenario, then you can be better prepared – and won’t be part of the three-fourths of employers who make major hiring mistakes.

For more information on getting the hiring process right the first time, download our free magazine: The Insperity guide to building a better team: How to attract, recruit and hire top talent.

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