According to Jörgen Sundberg, CEO of Connect Humans, a London-based employer branding agency, the expense of finding, selecting, and onboarding a new employee can reach $240,000. Recruiters are often unaware of how many resources are lost when even one person leaves. Furthermore, errors in hiring do occur frequently: 74% of employers acknowledge that they made a bad hiring decision. That represents almost three out of four employers!
Of course, hiring a poor employee and employee turnover will always be risks for businesses. People may encounter unforeseen circumstances in their lives that force them to relocate to a different city or nation, or perhaps they must care for a loved one.
In this article, we’ll explore the cost of a bad hire and offer advice on how to avoid them. We’ll discuss the main consequences of a bad hire, how to recognize a bad candidate, and tips for avoiding a bad hire. We’ll also provide answers to common questions about the cost of a bad hire.
By the end of this article, we would have provided you with one of the best recruitment tools in the market, and also allow you schedule a free demo of this tool
The typical cost of a poor hire is still a subject of discussion. It's a difficult task to take on because there are so many factors, including:
The Employee’s Compensation Package: The compensation package, or the sum of an employee's pay and benefits, is the first factor to consider when estimating the expense of a poor hire.
Opportunity Costs Because You Failed To Hire A Better Candidate: This represents the lost advantage that would have been realized if you had chosen otherwise while hiring staff.
Costs Associated With Finding A Replacement: When an employee leaves, you must quickly fill the void left by that person with another employee. According to an SHRM study, the average cost-per-hire is $4,129, and it takes 42 days to fill a position. In an effort to minimize your company's losses when coping with employee turnover, you often wish to hasten the hiring process for the replacement. This indicates that you will spend more time and money searching for a candidate to fill the position.
Costs Associated With Onboarding And Training Replacement Hires: You'll probably need your new recruit to pick up the projects your terrible hire was working on right away after you locate someone to fill the role. This means that you must expedite the training process, which always has a cost. It is expensive to integrate the new employee more rapidly so they can feel comfortable in the workplace and swiftly realize their full potential.
The Detrimental Effects Of Substandard Hires On The Morale And Performance Of The Team: Unmotivated employees often affect other workers negatively. Isn't it true that one bad apple taints the whole bunch? Also, if the bad recruit doesn't fit with the company's ideals, others may become less motivated to complete their tasks, which lowers productivity and performance.
Lost Customers And Revenue: Your staff serve as your public relations representatives. People may get the wrong impressions about your firm if you make a poor recruit who doesn't uphold its standards and principles. If someone like this works here, they might begin to wonder if the establishment is in trouble.
Diminished Employer Brand: A bad cultural fit can cost a company about 60% of the employee's yearly salary. It can hurt your brand and lose you the loyalty of your customers if your employees don't uphold the company's basic values
Cost Of Litigation: If you have to fire a bad hire because they are decreasing productivity or affecting their team’s performance negatively, they might choose to sue you. Legal costs might soon mount up.
Having that many variables means that the best way to figure out the potential cost of a bad hire is by calculating it yourself. To make a sample calculation, you need to:
Add up the number of hours that each member of the hiring team spent screening applications, holding interviews, and other tasks related to the role.
Add the amount spent on advertising for the opening
The cost-per-hire for the various software products you are utilizing should be added.
The cost of lost productivity is added to the total. Although this might be a little more challenging to evaluate, if you look at your KPIs, you should be able to make an educated guess.
Add the number of months the terrible recruit has been employed, multiplied by their monthly remuneration package.
Add the price of training and onboarding.
A bad hire can have serious consequences for your organization. From financial losses to damaged reputations, the cost of a bad hire can be devastating.
A company's reputation is something you develop over time. When you hire someone who doesn't share your beliefs, it may be challenging to maintain your efforts and those of your staff to uphold the brand image.
One of the fundamental components of every corporation is its company culture. Hiring someone who doesn't share your objectives or strive to uphold your attitudes can jeopardize all your previous efforts to create a strong corporate culture. That could have an impact on other employees, clients, and business partners, and cause some to question the reliability of your company.
The decline in productivity is one of the most significant consequences of a bad hire. When an employee is not up to the job, it affects the entire team’s performance and morale. This can lead to a decrease in the overall efficiency of the organization, which can have a negative impact on the bottom line.
One of the consequences of a bad hire is an increase in stress for other employees. Employees sometimes wind up picking up the terrible hire's tasks and doing extra effort to keep things on track because they don't want to deal with their problematic conduct. That can result in a higher staff turnover, which will be very expensive for your business.
Bad hires can happen for a variety of reasons. In some cases, the wrong person is hired because the hiring process was rushed or flawed. In other cases, bad hires happen because the employer was too lenient in their selection criteria. Whatever the case may be, it’s important to understand why bad hires happen so that you can take steps to prevent them in the future.
One of the most common reasons why bad hires happen is because of a lack of due diligence during the recruitment process. If the hiring team does not thoroughly investigate a candidate’s background and qualifications, they may end up hiring someone who is not suitable for the job. This can result in a bad hire that can be costly to the organization.
Another reason why bad hires occur is because of poor job descriptions. If the job description is vague or unclear, it can be difficult to determine if a candidate is suitable for the role. This can lead to a bad hire if the employer fails to ask the right questions during the interview process.
Finally, bad hires may occur because of a lack of employee training. If the employer fails to provide adequate training to new hires, it can be difficult for them to perform their job duties effectively. This can lead to a bad hire that can be costly to the organization.
It’s important to understand why bad hires happen so that you can take steps to prevent them in the future. By taking the time to thoroughly investigate a candidate’s background and qualifications, creating clear job descriptions, and providing adequate training to new hires, you can ensure that you hire the right person for the job.
When it comes to hiring, it’s important to take the time to find the right candidate for the job. A bad hire can cost your business time and money, and can even damage your reputation with both clients and partners. To avoid a bad hire, it’s essential to have a clear hiring strategy and use the best hiring methods and tools for your company.
Here are some tips for avoiding a bad hire:
Data-driven recruitment is a recruitment strategy that uses data-driven insights to inform the hiring process. It involves collecting and analyzing data related to job requirements, candidate qualifications, and hiring trends in order to make more informed decisions about which candidates to hire.
By leveraging data-driven recruitment, organizations can ensure they are hiring the best-suited candidate for the job while also reducing the time and cost associated with the recruitment process.
There are certain staffing softwares in the market today that can help you gather this data in order to make informed decisions. Brightmove’s ATS takes it a step further by scouring the internet for qualified candidates while allowing you to engage and screen them on the go.
When it comes to hiring, it's important to remember that speed should never be prioritized over quality. Making a rushed decision when it comes to hiring can lead to a bad hire, resulting in costly consequences that can be hard to recover from.
However, if need to fill in a position urgently as in the case of a bad hire that needs to be replaced. This may be a good time to try out recruitment softwares if you haven’t. Note that because there are lots of them in the market and you will need to work with the best ones that offer the best combination of packages.
Brightmove’s staffing software gives you the ability to quickly and easily screen candidates while also providing a platform for you to engage with them. Mind you, there’s no need to take our word for it. You can schedule a demo to see firsthand how brightmove can help you fill more jobs with top quality hires in less time.
When it comes to hiring the right people for your organization, one of the most important things to keep in mind is to avoid pity hiring. Pity hiring is when an employer hires someone out of pity or sympathy, rather than because they are the best fit for the job. This is a common mistake that can lead to dire consequences for your business.
A pity hire can be especially dangerous for a business because it means that the employer has chosen to hire someone who is not the best fit for the job. This means that the person may not have the skills, experience, or qualifications needed to do the job properly. This can lead to a decrease in productivity, an increase in mistakes, and a lack of overall job satisfaction.
When it comes to hiring the right employee for your organization, it is important to take the time to analyze the duties and responsibilities of each job opening. This will help you determine whether a candidate is qualified for the job and will ensure that you are making the best hire for your organization.
When analyzing duties and responsibilities for a job opening, it is important to be specific, thorough, and stay in touch with the latest trends in the industry.
Again, while this might be a difficult thing to achieve, brightmove’s ATS software makes it easier. Scour the Internet with BrightMatch and find companies that are posting for jobs by region and by job type. This gives you an insight into how other companies like yours describe the same opening as the one you’re trying to fill.
When it comes to hiring, it’s important to use the best methods and tools to ensure you’re finding the right person for the job. The right recruitment process can help you identify the most qualified candidates and make sure you’re making the best hiring decisions.
One of the best methods to use when hiring is to use a recruitment software. Recruitment software can help you automate and streamline the hiring process, making it easier and more efficient for your company. It can help you manage applications, track applicants, and communicate with potential employees. It can also help you find the right candidates by allowing you to search for applicants with specific skills and qualifications.
When it comes to hiring, it’s always better to be safe than sorry. Knowing how to recognize a bad candidate from the start can save your organization a lot of time and money.
Here are some of the telltale signs of a bad hire:
One of the telltale signs of a bad hire is when they start making excuses early on in the hiring process. This could be anything from being late to interviews, to canceling them at the last minute, or not getting back to you when setting up interviews. It’s important to recognize these red flags as they are indicative of a lack of commitment and professionalism.
A bad hire can be costly for any business, and one of the most common signs that you may be dealing with a bad candidate is if they take too long to get back to you when setting up interviews. If a candidate is not responsive and takes too long to respond to your emails or phone calls, this could be a sign that they are not serious about the job or are not organized and reliable.
Showing up late to an interview is one of the most obvious signs that a candidate is not taking the hiring process seriously. It is also one of the most common signs that a candidate may not be the right fit for the job. If a candidate shows up late to an interview, it can be a sign that they are not punctual and organized, two qualities that are essential for any job.
This could lead to a decrease in productivity, which could cost the company money in the long run.
Canceling interviews at the last minute and asking for a reschedule is one of the most common signs of a bad hire. It shows a lack of commitment and professionalism, and it can be a sign that the candidate is not taking the job seriously. This behavior can be especially damaging if you’ve already invested time and resources in the recruitment process.
When interviewing a potential candidate, it’s important to assess their knowledge of the job they are applying for. If a candidate demonstrates they have little knowledge of the position they are applying for, this could be a red flag that they may not be the right fit.
It is also important to assess a candidate’s enthusiasm for the job. If they appear to be unenthusiastic or lack passion for the position, this could be a sign that they are not truly interested in the role and may not be the right fit for the company.
Dealing with a bad hire can be a difficult and time-consuming process. It can also be costly in terms of both time and money. To avoid the cost of a bad hire, it is important to recognize the signs of a bad hire early on and take the necessary steps to rectify the situation.
The first step in dealing with a bad hire is to assess the situation. Ask yourself why the hire didn’t work out. Was it a problem with the candidate or the hiring process? If it was the candidate, what were the warning signs that were overlooked? If it was the hiring process, what can be done to improve it?
Once the cause of the bad hire is determined, it is important to take the necessary steps to rectify the situation. This may include terminating the employee, re-evaluating the hiring process, or providing additional training and support to the employee.
It is also important to consider the impact of the bad hire on the rest of the team. If the employee is not performing well, it can have a negative effect on morale and productivity. In order to prevent this, it is important to communicate with the team and provide support and guidance.
When dealing with a bad hire, it is important to remain professional and respectful. Even if the hire was a mistake, it is important to treat the employee with respect and dignity. This will ensure that the situation is handled in a professional manner and will help to maintain a positive work environment.
Finally, it is important to learn from the experience. Consider what went wrong and how the situation could have been avoided. Use this experience to improve the hiring process and ensure that future hires are successful.
One thing is certain, bad hires will have adverse effects on your company and employees. You would agree that it is better to prevent a bad hire than having to fix the problems caused by the hire, it is actually cheaper too.
Recruitment softwares present a potent solution to this problem. BrightMove currently has one of the most innovative products in the industry. We develop our product based on industry needs, changes, and most importantly, customer-solicited feedback.
Since 2005, we have been delivering technology solutions to the recruiting industry. These solutions are by recruiters for recruiters, just as our tagline suggests.
However, we encourage you not to take our word for it, schedule a free demo and learn how we can help you improve the quality of your hire in less time.
For additional topics of interest, check out:
Starting A Healthcare Staffing Agency? Top 5 Things You Should Know When Doing So.
The most effective way to identify a bad hire is to conduct thorough background checks, have an in-depth interview process, and use psychometric assessments.
A bad hire can have a negative impact on customer satisfaction, as customers may not receive the service they expect.
A company can measure the cost of a bad hire by looking at the recruitment costs, training costs, and lost productivity associated with the bad hire.
The 80% Rule in hiring is a rule of thumb that suggests that employers should fill 80% of a role with a candidate who has 80% of the skills and qualities needed for the job. This rule encourages employers to prioritize a strong skill set over a perfect fit, as the remaining 20% can be taught through on-the-job training and development.
Nearly Three in Four Employers Affected by a Bad Hire, According to a Recent CareerBuilder Survey. (n.d.). Press Room | Career Builder. https://press.careerbuilder.com/2017-12-07-Nearly-Three-in-Four-Employers-Affected-by-a-Bad-Hire-According-to-a-Recent-CareerBuilder-Survey
Frye, L. (2017, May 9). The Cost of a Bad Hire Can Be Astronomical. SHRM. https://www.shrm.org/resourcesandtools/hr-topics/employee-relations/pages/cost-of-bad-hires.aspx
About the Author, Jimmy Hurff
Jimmy is a seasoned technology executive & entrepreneur noted for leading business transformations. Over his 25+ year career, Jimmy has developed multi-platform expertise in the domains of engineering, data analytics, security, compliance & business transformation. Starting in 1995, Jimmy worked with his best friend, David Webb, to develop one of the world's first Internet job board and resume bank applications. From then to now, Jimmy has been consistently helping his customers to build great teams, using best practices and world-class technology.