The true cost of a bad hire

Job interviews can be a daunting prospect – and not just for those hoping to land the job. Recruitment is a time and resource-intensive process and hanging over every recruiter’s head is the spectre of a bad hire.

The time and cost of hiring and training a replacement employee after a bad hire can be substantial and that’s before you even consider any costs involved in letting the bad hire go.

The Chartered Institute of Personal Development estimates the cost of filling a vacancy is £4,000. If the post is for a manager the figure increases to £10,000.

But what many companies don’t realise is that there can be other, substantial, hidden costs. A bad hire can impact almost every aspect of your business from client relationships to employee engagement and overall revenue.

Braford Smart, a consultant who advises the recruitment industry, estimates the cost of a bad hire can be as much as four times annual salary for someone in a supervisor role and up to 15 times annual salary for VPs and executives.

If that sounds excessive, take a look at the potential impact in these key areas:

Productivity

This can be one of the hardest impacts to quantify but can be one of the most significant. If the employee has a bad attitude that may be a straightforward case of not getting much work out of them. But if they are incompetent they may do considerably more damage when mistakes have to be undone. If the employee is one that others rely on in order to do their work, the effect can be multiplied.

Revenue

If the employee is meant to be generating revenue, the cost of lost sales can be very high indeed. Every time they fail to reach out to a potential client and close the deal, revenue slips away.

Employee engagement

Perhaps one of the most tangible effects of a bad hire is the way a negative attitude can spread like a virus through an organisation. Even the keenest employee can find it hard to work alongside someone who is disaffected and uninterested in their job. If this is allowed to continue unchecked, work can become a chore for even the most committed. That means a drop in productivity across the board.

Managerial support

In a CareerBuilder survey supervisors reported having to spend nearly 20% more time overseeing the work of bad hires. Again, this is the multiplier effect, using managerial-level time and resources to minimise any damage done takes the manager’s focus away from more productive tasks.

Client Relationships

This last area is one where serious long-term damage can be done. It’s one thing for a bad hire to not be building new client relationships but if they are damaging existing ones the cost can be sky high.

So, it’s clear just how much damage a bad hire can do. You’re never going to completely eliminate the possibility of a bad hire but you can take these steps to minimise it:

Take your time

It can often feel like when you need to hire, you need to do it quickly. There is often pressure from existing employees who are dealing with increased workloads.

Remember that by hiring someone in haste, you risk having to do the whole process again, or as we’ve seen, doing much greater damage.

Talk to the team, explain what is going on and acknowledge the extra work they are shouldering. Give existing employees a small bonus or some other recognition. Goodwill will get you a long way.

Follow up references

It is astounding how many organisations do not thoroughly investigate and check out references. This doesn’t just mean checking that the candidate worked where they said they worked but talking to the referee and getting a sense of what they think. Are they rigidly sticking to a neutral line, suggesting they are less than keen but don’t want to actually say so, or are they effusive and happy to talk about that person? Trust your instincts.

Ask around

When looking to hire, ask colleagues, former colleagues and friends in the same industry if they know of anyone or if they themselves are interested. Ask your employees if they can recommend anyone. A loyal employee will think very, very carefully about the quality of the person they recommend before putting the name forward as they know it will reflect on them.

Take a test drive

If at all possible, hire the employee for an individual project first. That way you’ll get to see what the deal is before committing to an ongoing role. It is much better to spot any weaknesses at this stage and you may even find that they are more suited to a different role or are up to a bigger challenge than you had initially thought.

By taking these steps, you should be able to spot anyone who doesn’t have the skills and commitment to thrive.

A successful company depends on committed, engaged employees. Take the time to do a thorough screening of potential candidates and you will minimise the risk of a bad hire damaging your organisation.