Cost of Bad Hiring

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Cost of Bad Hiring



If you have applied for a job then you have probably wondered why it takes them so long to hire someone for the position.  What you may not realize is that the reason many companies take their time when it comes to hiring is because a bad hiring choice can cost the company in more than one way.

Businesses look at a variety of factors when they are going through the hiring processes.  They are not only considering the applicants’ skills and qualifications but they are also looking at how well they work with others and what type of attitude they have.  These are all things that they take into consideration when going through the hiring process.  It may be surprising to you that a single bad hire can cost a company millions of dollars and can also damage the morale and productivity of the company.  According to the Department of Labor and Statistics the cost of a bad hiring decision is equal to 30% of that one individual’s first year of their potential earnings.  If you think about that, depending on the role of that individual, that amount can really add up.  These are all factors that the company is considering as they navigate the hiring process.


A bad hiring choice can cost businesses and companies of all sizes whether they are huge corporations or small family owned businesses.  There are Fortune 500 companies that know better than anyone how a bad hire can affect their corporations and a mistake in hiring could cost them over 100 million dollars.  On average a bad hire can cost a company anywhere from $25,000-$50,000, according to a poll done by Vitamin T Staffing Firm.



Costs of a Bad Hire


Every company wants to hire the right people for their business, but sometimes that can be difficult especially if you are a small business that maybe does not have a hiring staff or human resources office.  The same can be said for larger companies and corporations although sometimes it may seem like they are not impacted as harshly by a bad hire as a small privately owned business. 


There are plenty of risks associated with a bad hire.  The number one reason is that the company loses time and money throughout the entire processes.  A company has to spend both time and money throughout the recruiting and hiring process.  Some businesses may even hire a head hunter or recruiter in order to find applicants for the position, and this service costs them money.  Not only do they have to spend money on the recruiting and advertising of the position but once they have applicants they have to spend time in order to look through the applicants and set up interviews.  This all costs money for that business.  Once an applicant has been hired they will likely have to be trained, if not for the position, than simply for the workplace.  This again costs time and money.  All of that time and money can be lost if that employee is a bad hire.


A bad hire can cost a company plenty but the most common issues a business will encounter with a bad hire include:


·         Productivity

·         Morale

·         Customer Relations

·         More oversight or supervision

·         Revenue


Productivity of that one bad hire can actually impact several other areas of the company.  If that bad hire does not enjoy their job or simply is not qualified for it and procrastinates than their productivity will be low.  This can impact the business’s revenue and the morale of the other employees.  This can also lead to the supervisor having to spend more time watching over that one employee. 


Another risk of a bad hire is if they have to interact directly with your cliental.  This can cause the company to lose customers and may even force other employees to try to pick up the slack of that individual, which will cause them to not only begin to dislike that individual but also their jobs.  This is where another issue arises.  When the morale of your employees starts to be affected by one bad hire it can really cost the company, especially if employees start to leave due to that person. 


As you can see one small problem can quickly snow ball into a larger issue that can end up costing a company thousands if not millions of dollars.  This is why a lot of companies take the time to find the individual that they think will fit perfectly with their company.  If a business follows a few rules they can hopefully avoid a bad hire.


How to Avoid a Bad Hire?


There are a lot of different methods a company can utilize to help avoid hiring a bad employee:


·         Don’t Rush the process

·         Check their References, both their professional and personal references

·         See if you can negotiate a trial run with the applicant


Having a good hiring plan and a great group of people to help with the process can also make a huge difference in avoiding a bad hire and saving both time and money.