How Much Does a Bad Hire Cost Your Company?

April 24th, 2020

When you post an open position and start interviewing candidates, you hope for the best. But are you prepared for the worst? Have you calculated the actual cost of a hiring mistake? If you haven’t done this yet, this simple move can show you the stakes before you gather data that can help you make your decision.

If the stakes are low, that means the position is low-responsibility, or low-salary, or very short term, or all three. But most positions don’t fit into even one of these categories. Here are costs to factor into your hiring plan.

A bad hire leaves before ramping up.

If you hire someone who can’t handle the role or isn’t happy in the job, they’ll probably be gone (voluntarily or otherwise) before they’ve had time to fully complete their training and start making meaningful contributions to the company. This typically happens within about one year, so a hire who leaves before one year hasn’t fully made up the cost of the hiring process. Not only do they not provide a return on their expensive training or make up for their potentially expensive rookie mistakes, but they take the value of that training and those mistakes to their next employer, who may be a competitor.

A bad hire can disrupt the social fabric.

When a new employee arrives on the scene, the person gets to know his or her teammates, earns trust, and makes friends. But then…she leaves. When she goes, she pulls threads from the fabric of social continuity, leaves uncertainty about who might arrive to fill her place, and forces everyone on the team to start again from scratch with someone else. If the new hire alienates others and undermines trust before leaving, that’s even worse. In the best-case scenario, you hire someone who gets along and builds rapport with the team, then stays long enough to become a valued member of the workplace “family.” In the worst case, he arrives, departs, and leaves a trail of expensive social chaos in his wake.

The Impact a Bad Hire can Have on Your Team

February 1st, 2019

When you calculate the cost of a hiring mistake, you can easily add up the obvious costs: the post you’ll need to publish to attract replacement candidates, the cost of background checks and interviews for those new candidates, and the cost of onboarding for the replacement you ultimately choose. But there are few costs and expenses associated with a hiring mistake that are intangible—They can only be estimated, and while difficult to precisely measure, these costs can be shockingly high.

For example, a hiring mistake (usually defined as a candidate who leaves within one year) can have a dismal impact on the productivity and morale of your entire team. Here’s how.

An underprepared candidate lowers the bar.

Your new hire came on board unprepared for the job and lacking the skills necessary for the role. He struggled for a while before he left, and though he tried, it was unrealistic to expect him to gain meaningful expertise during a six-week training period. What does this hiring decision tell your other employees about an “acceptable” level of competence in the missing skill area (for example, SQL, Photoshop, customer service, language fluency, written communication, or basic math)? The bar of expectation drops with every day the unprepared hire stays on the team.

Attitude problems are contagious.

If your candidate failed because he was sullen, uncooperative, or had anger issues, that’s unfortunate, and a contagious bad attitude doesn’t always show up during an interview. But even more unfortunate: the impact of his sulks and complaints may stay in the air even after he’s shown to the door.

“Work ethic” is a shared metric.

What would you call an appropriate work ethic in an office where most workers leave at 4:00 pm? How about an office where the “slackers” are still at their desks at 7:30? “Hard work” is a relative term, and if you introduce an employee who vanishes in a cloud of self-congratulation at exactly 4:59 each day, others are inclined to follow suit.

Bumblers create roadblocks.

Sometimes the nicest candidates in the world arrive in the workplace and spend more time standing in the way than helping the team. If you hire one of these, you’ll have messes, mistakes, and derailed projects to fix after they leave, plus all the back-ups and work-bottlenecks you’ll need to re-open.

The hidden cost.

Unfortunately, hiring the wrong person can also put tiny cracks in something very valuable: trust. Your teams trust you to make smart decisions when it comes to assessments of character and background, and their success depends on your ability to get it right. One mistake can be easily forgotten, but with each additional misjudgment, the task gets harder. Choose the best candidates available, and your existing teams will thank you.

For more, contact the hiring and staffing pros at PSU.

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