One of the most hidden but costly aspects of being in business is dealing with employee turnover. From money wasted on advertising and recruitment needs to the time and effort put into training a new employee, having a continual turn-style of employees coming and going can reduce a staffing budget in very little time.
Unfortunately, many organizations can’t see past replacements, choosing to react to staffing challenges rather than be proactive. Being in a rush to add another warm body to the mix only results in bad hires, which can be devastating to employee morale and productivity. The true cost of a bad hire comes from the affect this has on other employees. Once a bad hire is on board, the situation quickly deteriorates and then it’s up to the company to decide if termination or retraining is even an option.
In the above Resoomay infographic, the astronomical costs of making a bad hire are illustrated. While these are just examples of the possible costs of hiring the wrong person for the job, they make a serious point.
- The average cost of a new hire in a mid-level assignment is nearly $60,000 USD.
- As of 2009, US companies spent an estimated $125.88 billion just on training and development.
- For a business with 64 employees, the cost of a single turnover can be as much as $8,000 USD.
- 44 percent of the most loyal employees feel they are overworked compared to their peers.
- A bad hire of a second-level manager can be $840,000 USD factoring in hiring cost and compensation; cost of maintaining the employee, business disruption costs, severance pay and mistakes, failures, and missed business opportunities caused.
Bad enough to be fired?
The issue that most Human Resource managers face is how bad does someone need to perform in order to be considered a bad hire? In other words – is an employee bad enough to be fired?
The truth with bad hires is that they bring a new level of poor performance to the team that extends far beyond their assignment. They generally have bad attitudes, which permeates the corporate culture. They eventually have a very negative impact on the rest of your employees, bringing the entire company down. If you are asking yourself this question about a new hire, time to take action is now as compared to a later lawsuit.
How can you avoid bad hires?
Tony Hsieh, the CEO of Zappos.com, advises in his book Delivering Happiness how his company avoids bad hires. He estimates that over the years, it has cost his company nearly $100 million in bad hires, therefore a plan is in place to prevent this from occurring again in the future. This is sound advice for any business owner who hopes to stop bad hires from happening.
- Hire for Culture Fit – Make sure that all candidates have the right personality, values, and goals as the company so that they fit well into the corporate culture. This can help to increase longevity and productivity in the workplace.
- Screen Candidates Well – Each candidate should be thoroughly screened before hire, including a background check, previous employment and educational verification, and reference checks to make sure he or she is representing the truth.
- Do Several Separate Interviews – Keeping the recruitment process as objective as possible is one way to leave opinion or emotion out of the interviewing part. Have each candidate meet with several management levels, then make the best decision when hiring a candidate.
While it may be tempting to get a new hire into a job quickly, it can cost you in the long run if you don’t choose the right person. Heed the above tips and avoid the pitfalls of a bad hire.
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