The True Cost of a Bad Hire

Hiring the right person for your business has a hugely positive impact on your workforce and business, however, bringing the wrong person in can be very disruptive, can drain your productivity, time and ultimately affect the bottom line.

A global survey, carried out for CareerBuilder and including more than 6,000 hiring managers and human resource professionals, found that a huge number had hired someone who turned out unsuitable for the job or did not perform well. This always had a negative impact on their business in terms of loss in revenue, productivity and challenges with employee morale and client relations.

According to the U.S. Department of Labour, the price of a bad hire is at least 30 percent of the employee’s first-year earnings. For a small company, a five-figure investment in the wrong person is a threat to the business.

As a general rule of thumb:
  • The higher the position whin the organisation (and thus higher the salary), the higher the cost of the bad hire
  • The longer the ill-placed person has worked at the organization, the higher the cost of the bad hire.
  • The more training wasted on the person, the higher the cost of the bad hire.


What are the costs of a Bad Hire?
  • The average cost of a bad hire is calculated as 30% of the employees first year earnings.
  • 10% of sales opportunities are lost.
  • Hiring the wrong person can cause a 36% drop in productivity.
  • Hiring a replacement is time consuming, causing 40% lost time, recruiting and training the new person.
  • It can disrupt the team dynamics and has potential to cause a 32% drop in employee morale.
Why do companies make bad hires?

If bad hires cost so much money, why do they keep happening?

The researchers at the National Business Research Institute found the following:

10% of respondents said that they just don’t have the resources to go through applications looking for the best candidates. But the number one reason, 43% of companies made what turned out to be a bad hire: They needed to fill the job quickly and as a result offered the role to the wrong person.

How not to make the wrong hire
  • Preparation: Write an honest and detailed job description, so that the business and potential candidates know exactly what the role entails.
  • Dedicate Time: Be prepared to dedicate time to making the right hiring decision.
  • Interviews: Assess the candidate against specific criteria that is essential for the role. Evaluate not only their skills and experience, but also whether they’re a good cultural fit for the company.
  • Background Checks: Take the time to take thorough references
  • Select and invest in the correct, specialist recruitment partners: Saving money by going for the ‘cheapest option’ or not investing the time in a proper briefing could end up costing you a great deal more in the long run.  An expert recruiter should know exactly the type of person who would fit the role. They may already have a shortlist of suitable candidates for you to choose from, saving you time, and allowing you to get on with your day job.  Leave the recruitment to the experts!

See here for tips on how to work with a recruitment partner:

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