How Much Does a Bad Hire Cost an Employer?

Business Analytics


23 August 2019

How Much Does a Bad Hire Cost an Employer?

Hiring the right person is no cakewalk. Not only do you have to look at skills and aptitude for the job, but also whether the person would fit in well with your company’s values, and with the team you’re hiring them for. The fact that a bad hire is expensive is widely known. However, many organisations fail to understand how large the cost may actually get. The costs go beyond the tangible losses related to turnover and hiring a new recruit to fill the role which would include the recruitment process as well as the new joinee’s onboarding and training.

According to a popular 2012 report by the Centre of American Progress (the report is old, but the facts still hold), the average cost of replacing a worker costs about 20% of their salary. An infographic by EBI Inc. estimates a whopping 43% of lost revenue to be attributed to employee theft. These, however, are not the only costs associated with bad hires. Besides the loss of productivity and recruitment costs for the replacements, there are several hidden costs involved, like a disruption in staff morale resulting in a loss of productivity, impact on customer relations depending on their role, and even a significant business reputation as a whole in some circumstances.

With these phenomenal costs involved, it’s always better to be careful while hiring for new roles than to regret a bad hire later. Here are some tips on how to avoid a bad hire.

1. Align your Job Description to the Role

Before you start hiring or even rollout applications for the role, the first thing to do is to match the job description you give out to the role you hope to fill. An unclear or ineffective job description often attracts candidates who are either unqualified for the job or wouldn’t fit it. It not only saves your time as an employer to sift through their applications and filter out the ones you’d actually want but may ultimately result in a bad hire. Instead, if your job description is effective and clear, you would attract highly qualified candidates who are more likely to fit the specific position you’re hiring for. This involves understanding the role yourself first, which is an essential step to avoiding bad hires.

2. Know your Target Audience and Market Appropriately

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The next step is to ensure that only your target audience applies to the job. Marketing your job description and optimizing the content is key when it comes to this. Depending on whether you’re looking to reach the most people or if you’re looking for specific talents, there are various websites on which you can publish your job posting. Further, to ensure that the posting appears to people looking for jobs on any website, it is essential to employ SEO strategies into the creation of the job description. This would ensure that people who aren’t qualified or experienced enough for the position wouldn’t apply for the role.

3. Have a Structured Hiring Process in Place

A major cause of bad hires is when organisations use a disorganised or unstructured hiring process to fill any job role. Selecting candidates based only on their resume, asking only basic questions on their interview or being unsure as to how to go about the hiring process are dangerous mistakes one can make. They also deter skilled professionals from accepting a job, because your hiring process is a reflection of your organisation. A structured hiring process with specified, clear steps goes a long way in preventing bad hires. Include resume shortlisting, personality tests and at least one interview in your process to make it effective.

4. Don’t be Hasty

It’s always difficult to replace an employee, especially if they are senior management. However, in the haste to fill a role, organisations often end up with the wrong people getting hired. The higher the post, the more significant your hiring decisions would be and the more careful you should be while selecting someone. A little extra time taken in recruitment may cost you a bit in terms of lost productivity during the period, but this extra cost is nothing when compared to the costs incurred as a result of a bad hire. So it’s crucial that you’re careful in ensuring the right fit for the job, even if it takes some extra time and effort on your part.

5. Interview Correctly

As a hiring manager, you must be well prepared for interviewing the candidates. Keep questions ready, beyond the basic ones. They should, of course, be based on the job profile, but also on your expectations regarding the personality of the candidate. Involve subject matter experts for specific job-related questions if necessary, and ask probing questions to get an insight into the candidate’s personality. Listen to what they say and watch their non-verbal cues, too, during the interview. Also, ask them if they have any questions for you because their questions will tell you how much they know and care about the role and whether they have researched your organisation or not. An effective interview goes a long way in avoiding bad hires.

6. Look Outside the Interview, too

The interview is, of course, an important tool to judge your candidates, but what they do outside of the interview also provides great insight into their personality. They are more likely to show their real personalities when they don’t think they are being watched or judged. Their punctuality in arriving for the interview, the way they dress, their confidence level and even how they treat your staff can tell you a lot.

7. Check References

Always be sure to ask for references during the interview, and don’t forget to check them. If the referrals are reputed in the industry and have good things to say about your candidate, it’s always a good sign. Further, if you ask the right questions and listen to what is said and how you may get better insights about your candidate than you would through a resume or the interview.

8. Involve Future Co-Workers

This is not a common practice in the industry, but it’s an effective way to avoid bad hires. Asking the team the candidate would eventually work with about them would not only give you new insights about the candidate but would have the additional benefit of the teams feeling involved. You could also go a step further and ask the people who would work for them about the candidate. This is especially valid for senior management posts. Since the person you hire would be their boss, their opinions matter, too, and they would think from the perspective of how good a boss he/she would make, which is a new angle and would give you a better insight into how well the candidate fits the position you’re looking to fill.

This list is not exhaustive by any means, and you need to take great care while recruiting new employees to avoid hiring mistakes. But if you follow these tips, it would certainly reduce your chances of hiring the wrong person for a job.

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