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What’s the True Cost of a Bad Hire?

They may not have experienced the type of PR nightmares that Netflix experienced from its ill-conceived decision to launch Qwikster or Yahoo! Inc. saw after firing CEO Carol Bartz over the phone, but two-thirds of American companies say they’ve made business mistakes this year they wish they could take back. Those mistakes, according to a new survey, came in the form of bad hires, the results of which ended up costing them in more than just bruised egos.

According to a new CareerBuilder survey on the cost of a bad hire, 69 percent of employers reported that bad hires lowered their company’s productivity, affected worker morale and even resulted in legal issues.

Forty-one percent of companies estimate that a bad hire costs more than $25,000, and one in four said it costs more than $50,000.

While some mistakes are beyond the hiring manager’s control, there are ways to avoid hiring the wrong person. “The more thoroughly the candidates are vetted, the less likely they will be a poor match,” says Rosemary Haefner, vice president of human resources at CareerBuilder.

Haefner advises employers to allow job candidates the opportunity to meet as many employees in the department as possible – especially if they will work closely together. Also, candidates should provide ample evidence to show they have the skills and work experience required for the position.

Hiring mistakes happen…but why?
When asked to give a reason for the bad hires, an estimated 34 percent of employers attributed the mistake to the fact that sometimes things just don’t work out. A rushed decision, however, topped the list of reasons companies gave for making a bad hire.

The price of a bad hire: It’s more than just money
The price of a bad hire adds up in variety of direct and indirect ways. For example, 9 percent of companies said bad hires result in legal issues and 11 percent said they result in fewer sales. The most common effects of a bad hire are:

  • Lost worker productivity: 41 percent
  • Lost time to recruit and train another worker: 40 percent
  • Costs associated with recruiting and training another worker: 37 percent
  • Negative impact on employee morale: 36 percent
  • Negative impact on client solutions: 22 percent

How bad is bad? Characteristics of a bad hire
When it comes to what makes someone a bad hire, employers reported several behavioral and productivity related problems:

  • Failure to produce the proper quality of work: 63 percent
  • Failure to work well with other employees: 63 percent
  • Negative attitudes: 62 percent
  • Immediate attendance problems: 56 percent
  • Subject of customer complaints: 49 percent
  • Failure to meet deadlines: 48 percent

Can bad hires turn into good employees?
For more tips on how to avoiding hiring mistakes, check out the recent interview with Hire with Purpose author Jay Goltz. Wondering whether to fire or try to fix an employee?  Get insight from this recent interview with management expert Anne Loehr, author of Managing the Unmanageable: How to Motivate Even the Most Unruly Employee.

Mary Lorenz

About Mary Lorenz

Mary is a copywriter for CareerBuilder, specializing in B2B marketing and corporate recruiting best practices and social media. In addition to creating copy for corporate advertising and marketing campaigns, she researches and writes about employee attraction, engagement and retention. Whenever possible, she makes references to pop culture. Sometimes, those references are even relevant. A New Orleans native, Mary now lives in Chicago, right down the street from the best sushi place in the city. It's awesome.
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One way to reduce bad hires is to focus on employing good people rather than skillsets. In many companies, recruiting processes have trended towards demanding a full set of required skills for a candidate to be considered. This practice greatly narrows the field for the hiring selection. Companies that identify minimum, essential core skills for each position and focus more on the personal attributes of candidates will end up making better hiring decisions.

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The way to avoid "rushing to hire" (mentioned in the article as a key mistake) is to not wait until there's an open requisition to recruit for. Continuous recruting by your current employees and hiring top talent when you find them - not when you desparately need them and they aren't anywhere to be found - is the key.

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It's no surprise that there employers are making bad hires. Most supervisors aren't taught best practices in hiring, not to mention employee management. It's no one's fault really. The recruitment and interview process is not part of the learning process for many managers so managers are winging it. It behooves businesses to take some time to learn best interviewing practices to avoid some of the tangible and not so tangible costs of making poor hires.

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A common mistake made by many employers is rushing into filling a position. In staffing an open position in a time of need, Employers may jump the gun and cut the pre-screening process short as a quick solution. HR can avoid this costly situation by ensuring they have the right match before they hire a candidate on board.

Here are some useful articles.

http://staffing-solutions.biz/staffing-articles/

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