cost of a bad hire

When you get your hiring decisions right its a cause for celebration and relief as the pursuit of your departmental and corporate goals can continue unabated and with renewed gusto either as was or if its increased headcount with added momentum. However, if and its a big if, you get these decisions wrong the impact can be catastrophic for the business.

Research by the REC and other bodies  over recent years has suggested that the cost of bad hiring decisions to businesses can effectively be as much as 3 times the Annual Salary of the “Bad hire” which at the upper end of the salary ranges can of course be quite significant! Bizarrely against this backdrop still over a third of hiring managers believe that the cost of a poor hiring decision to the organisation are nothing. 

We believe otherwise and that an Organisation can be impacted in several ways which we have categorised into 5 groupings although they all effectively interlink from a "cause and affect" perspective.

The 5 Impact groups are as follows:-

Pressure on Budget Constraints and Targets:-

 

budget

The obvious tangible costs of a 'bad hire' are the lost salary, external recruitment cost (if any), lost training costs and the reduced level of productivity whilst the new employee approaches the level of output that is expected from someone performing to their optimum in that role. This reduced productivity impacts on the organisational ability to hit targets and corporate goals, especially when on the job training from fellow colleagues impacts their own productivity levels and their part in the corporate goal. 

 

Negative Impact on Business Reputation

 

reputation-1

Where you have hired a person who is not aligned with your mission, values and your service offerings, ultimately they will lack the basic service acumen to execute your customers service objectives. If they are customer facing this level of dissatisfaction is what your customers experience and as we all know, a bad customer experience can be quickly transmitted via a host of online review platforms these days, leading to potentially damaging results.

Its similar to the old adage in that you're as good as you're  worst employee!

Dependent on the seniority and the type of role this can be potentially dangerous for a business and lead to lost or reduced sales.

It could also result in delayed project work completion and at its worst extreme legal claim against your business.

From an internal perspective, management reputation needs to be considered. When a company hires and then subsequently keeps a bad hire, for what is considered too long in anyones eyes, colleagues can question the top-level management’s ability to make smart decisions. This can place a strain on the relationship between the management and the staff in a business which can also impact staff turnover down the line.

 

Loss of Productivity

 

productivity

Closely allied to the above is potentially damaging lost productivity for the business. This relates to both the onboarding, shadowing and teaching of new members of staff during their induction period whilst they get upto speed. Additionally however and probably more worryingly is that it make take several months of working below capacity to identify that the new incumbent is not right for the role. In this time you may have lost sales and opportunity and it may have taken some of your capable and experienced employees away from operating at normal capacity.

 

Increased Staff Turnover

 

staff turnover

A bad hire frequently has an indirect impact on other members of the team disgruntled by the disaffected employee who may themselves consider their position.The indirect impacts of this  are higher staffing costs to make up for the lack of employee and team productivity, institutional knowledge loss whegood, trained people leave, and increased training costs as you hire replacements.

 

Negative Impact on Management

 

Management negativity

As we have established, hiring the wrong people because you are “in a rush” to to re recruit can be both stressful and unfruitful.

This can in turn lead to burn out and a reduced job satisfaction amongst management that is detrimental to their overall happiness and also company productivity and performance. If the changes lead to the workplace culture turning into one of micromanagement, correction and reprimand rather than collaboration, creation and mentoring, the job of the management team can becomes one of parent and babysitter and this in turn impacts staff turnover and productivity, so you can see the ever decreasing circles nature of the bad hiring decision.

Often we see managers and leaders looking to HR to fix people and situations that could have been avoided by demonstrating more consciousness and awareness before, during, and after hiring by having robust processes referred to in a recent article, although we believe their is a collective business responsibility here.

It seems that in many companies an admission of making a poor hire is a far worse offence than allowing and tolerating below par performance to continue.However as we have elaborated upon here the cost of doing nothing about a bad hire far outweighs the cost of being proactive and creating high-impact hiring solutions.

If you would like to evaluate your hiring processes as you seek to reduce the risk of a "bad hire" why not complete our Hiring Checklist exercise. 

Also why not schedule a  Schedule a Call with one of our experts to discuss how we can help your recruiting needs.

 

 

About the Author: Mark Woffenden

Mark Woffenden is a Director at Lucy Walker Recruitment and has an extensive knowledge of the issues and workings of the West Yorkshire and Greater Manchester Commercial markets developed over the last 20 years in the Industry