The Real Costs Of Hiring The Wrong Employee

Oct 25, 2017

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Among fast-growing companies, unfortunately, bad hires happen. Limited resources, high expectations, and impending deadlines often end up forcing your hand. What most managers fail to understand when hiring, though, are the real costs of making this mistake.

Employees who aren’t a good fit have a tendency to weigh heavily on your business’ finances. If you want to avoid having to pick up the pieces, get familiar with the consequences of what you’re about to do!

The Main Reasons Behind a Bad Hire

In a majority of cases, a bad hire is the product of faulty recruiting and little dedication. The need to quickly strengthen a company’s workforce also plays a vital role in hiring the wrong person.

In 2012, an article on Forbes identified the need to compromise as the number one reason behind a bad hire. Companies on a strict budget tend to settle. Recruiters would often prefer to look for qualities that they feel a candidate might have rather than for those that they must have. In turn, this leads to poor prioritization. Bad decisions are made and viable applicants might be ignored altogether.

From that moment onward, the entire endeavor is no longer about adding capable individuals to your group. What you’re doing is hoping for a promising candidate to blossom and become the colleague you always wanted. While this has been known to happen, similar outcomes are extremely rare. More often than not, these people simply turn out to be a complete waste of both time and money.

Asking the right questions can make a world of difference. When a candidate is interviewed for the first time, their true abilities are rarely tested. Most interviews focus on past achievements and success stories. Considering how the person in front of you likely wants to get the job, it’s only natural that they’ll tell you everything they think you want to hear!

Direct Costs: Recruitment, Onboarding, and Training

The preliminary recruitment process is in and of itself a huge expense! Before anything else, you’ll have to send out a job requisition then read through all the application responses. This is indubitably going to take time that you could have invested in other endeavors. Putting someone – like a recruiter - in charge might be a sensible idea, but they too expect to be paid for their time!

You should never underestimate the cost of interviews and follow-ups! Prior to being selected, these potential employees need to come in and show you what they can do. Your HR department will then filter all requests, screen all applicants, create a curated list then send it your way.

When a suitable candidate finally presents themselves, an onboarding program should be enacted. As you can imagine, this is going to have a negative effect on your productivity. After all, most people won’t manage to look after the new guy – or the new girl - and meet all deadlines at the same time.

It is also plausible that your new recruit will need some form of training. Especially when you’re targeting a niche market, general knowledge often isn’t enough. By the time you realize that the new member of your team simply won’t fit in with the rest, a sizable amount of your budget has already left your bank account!

Indirect Expenses: Delays, Damage Control, and Replacement

To make matters worse, you’re now facing an even bigger challenge. That gaping hole in your roster needs to be plugged as soon as possible. Unless you’re ready to lose even more funds, some sort of damage control plan is now in order. Your other employees can help, but they too are only a temporary solution.

What you should do, instead, is immediately begin looking for a suitable replacement. Starting from scratch with another recruitment round will once again slow you down and have financial consequences. Still, such an approach is better than having your company slowly grind to a halt. In the meantime, you can also try spreading your unattended assignments and tasks across the rest of your entire workforce.

Expect delays, drops in performance, and a few unhappy clients. Unfortunately, there is little that you’ll be able to do about it. This can lead to poor client satisfaction and the company’s reputation could potentially take a hit. In most cases, the effects can last anywhere from a few weeks to entire years.

Your other employees might also feel a bit stressed while things are being worked out. Coupled with the increase in workload and the additional onboarding periods, this too will once again take a huge toll on your productivity! In layman’s terms: a bad hire has the ability to thoroughly damage all parts of your company.

In Conclusion

Making a full recovery from a bad hire could take months. On average, such a mishap can set your company back several hundred thousand dollars. According to statistics, hiring the wrong person will cost you two to three time their salary.

As a result, an incompatible worker who would have earned $50,000/year can drain up to an astounding $150,000 from your company’s bank account.

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Topics: Cost Per Hire

Todd Miller

Written by Todd Miller

Director of Marketing, DHR

Todd leads DHR’s marketing department and is responsible for overall marketing strategy and execution. With nearly 15 years in the sourcing services and solutions space, Todd provides interesting insight on a variety of topics in this fast-paced and ever-changing industry.

Todd lives in Scottsdale with his two daughters and Collie/Shepard. One is a good boy.

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