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The Cost of a Bad Hire

In the big, bustling world of business, taking the time to hone and revamp your interview process might seem like a luxury. You might ask, “Who has time to reevaluate something that’s been fine for years when we’ve got a business to run and employees to manage?” 

Trust us, we understand that feeling! 

What if we told you that by taking the time to implement a thoughtful behavioral interview process, you could be saving yourself countless precious minutes and an astounding amount of money for your company? 

That’s the springboard for what we’re talking about today: how much a bad hire can cost you in time, mental bandwidth, and money. In our next post, we’ll show you how to pave the way for multiple successful hires in your future through a focused, deliberate behavioral interview process. 

One bad hire can cost the company 2.5 times the employee’s salary.

How much will a bad hire cost your company? 

Here’s the expensive reality: After it’s all said and done — the initial hiring process, employee maintenance, actual compensation, disruption costs, recruiting, replacement, onboarding expenses — one bad hire can cost the company 2.5 times the employee’s salary.

There are costs that are easy to see; the hiring costs and compensation, for example, are fairly straightforward. The thing about a bad hire, though, is that it’s never straightforward. What about the disruption an unhappy or unengaged employee can cause within an organization? What about the mistakes that employee makes out of dissatisfaction or boredom? 


The Plain-to-See Costs:

Hiring: When you’re calculating the cost of a bad hire, you’ll have to consider two different hiring processes. The initial hire, and the ultimate hire of a replacement. Between advertising for the position, time set aside for interviews (that could have been spent on billable work), training, and onboarding, you’re going to be spending a hefty amount of money filling this position. 

Compensation: Bad hires don’t always reveal themselves as such right away. During the duration of their short stay at your organization, you’ll be paying their salary no matter their performance. 

Severance: Depending on the position or company, a significant amount of money can go toward severance, for an extended amount of time. 


The Hidden Costs:

Morale Disruption: An employee, when placed in a position that isn’t right for them, inevitably becomes disgruntled… and they are rarely quiet about it. An unhappy employee can affect those around them, which can hurt the company as a whole in morale, which eventually affects productivity in many employees, rather than just one. In an extreme case, a bad hire could feasibly cost you another employee altogether. 

A Drop in Productivity: When a company is made up of satisfied, engaged employees, productivity soars. People work together harmoniously, they increase output, and ultimately increase revenue and reputation. When an employee is placed in an unfit position for them, however, their work output is sure to drop due to dissatisfaction and lack of motivation. Think of the progress that could be made by someone hired to fit their position, as opposed to the mistakes, lost progress, and missed business opportunities that stem from a bad hire! 

Reputation Damage: The costs of a bad hire don’t stop affecting your company once that employee’s time there has been terminated. In addition to the hiring costs that come with finding a replacement, negative online and unsavory word-of-mouth reviews can haunt your company for a long time. It could mean that prospective employees shy away from applying, or even that potential business partnerships are never brought to the table, all because an improperly hired employee left unhappily. 

It’s worth your time, energy, and attention to create a hiring process that focuses specifically on the success of your new employee, rather than simply filling their position.

The solution? Hire to fit. 

The bottom line? It’s worth your time, energy, and attention to create a hiring process that focuses specifically on the success of your new employee, rather than simply filling their position. Stay tuned for our next blog post, which will introduce you to the behavioral interview process — the first step on the path to a future of successful, satisfied hires!

COMMENTS (One Comment)

  • Jeff Randell

    I could not agree more with this excellent post. I have been on both the positive side of a great hire and the negative side of a bad hire and the resulting costs. They are always more than they appear on the surface! I personally LOVE the HR process and learning more about how to do it better is always a goal of mine. We don’t have a large staff, so each decision is so crucial for our overall success. Thanks again!