The Many Costs of a Bad Hire
Any new hire comes with a price tag. You have to spend time and money advertising the position, evaluating job seekers, onboarding the top candidate, and more. Currently, it takes an average of 75 applicants and 16 interviews to secure 1 employee who will stay long-term. With that much time and resourcing going into the recruitment process for each candidate, those prices can really add up.
Many hiring managers assume the risk of making a bad hire is relatively minimal, especially for critical roles that need to be filled quickly. However, the opposite is often true, as a single subpar employee can substantially harm operations, disrupt established teams, and even cost the company customers.
Here are a few ways a bad hire impacts your organization:
1. Recruitment Costs
Recruitment costs associated with a bad hire can quickly accumulate and become a significant financial burden for an organization. At the outset, expenses arise from advertising the job opening on various job boards, which can range from inexpensive postings to premium listings costing hundreds of dollars. This is followed by the time and resources spent conducting phone screens and interviews, often involving multiple team members who must allocate valuable work hours to the process. Once a candidate is selected, onboarding begins, requiring investment in orientation sessions and materials to integrate the new hire into the company culture and workflow. Training expenses further add to the costs, as they encompass both formal training programs and the practical, hands-on guidance provided by colleagues to ensure competence in the role. Should the hire not work out, these investments are rendered fruitless, eventually necessitating further rounds of recruitment to replace the unsuitable candidate.
2. Loss of Business
A bad hire also comes with a price tag, and it’s significantly higher than one may expect. On average, a subpar selection will cost a company at least 30% of the employee’s first-year earnings. Additionally, if they work in sales or another revenue-driving position, there is an additional loss of business. If training funds are spent trying to get the bad hire to the point where they can perform, but the efforts don’t yield results, that’s additional money wasted. And if the person is ultimately fired, then you have to manage recruitment and hiring expenses again to find another candidate.
3. Productivity Cost
When you make a bad hire, your company may experience a productivity drop of approximately 36%. This occurs because the new employee not only fails to meet production standards, they also hinder their team. Often, other employees have to spend their time correcting errors made by the bad hire or simply waiting for the new worker to complete prerequisite tasks. Alternatively, they may have to put some of their own duties aside to cover essential activities the bad hire should be managing on their own. Cumulatively, the situation also damages the team’s morale. They can become frustrated with increased workloads or a bad hire’s performance, a scenario that can lead to falling engagement or even burnout. Hiring a replacement can have a similarly damaging effect, as you will again have to operate short-handed and then wait for a new hire to be brought up to speed. While this productivity dip may be necessary to get the right person in the role, it’s a secondary loss that could be avoided by waiting for an ideal candidate from the beginning.
4. Negative Work Environment
A bad hire can significantly undermine work culture and disrupt team dynamics, leading to a less cohesive and harmonious working environment. When a new employee fails to align with the company’s values or lacks the necessary skills, it can create friction and tension among team members. This discord often results in reduced collaboration and weakened communication, as colleagues may become reluctant to work closely with the problematic hire. Additionally, the presence of a poor-performing individual can lower overall morale, leading to dissatisfaction and disengagement within the team. As employees become increasingly frustrated by the additional workload and stress caused by covering for the underperformer, the once supportive and motivated work atmosphere can quickly deteriorate, impacting both productivity and retention rates as talented team members may choose to seek employment elsewhere.
5. Hinder Brand Reputation
A bad hire can significantly damage a company’s brand reputation, which is crucial both for maintaining current customers and attracting new talent. When an employee lacks the professionalism or competence expected by clients, it often results in a decline in service quality, directly affecting customer satisfaction and loyalty. Clients who experience poor service may choose to take their business elsewhere and can also spread negative reviews, tarnishing the company’s image in the marketplace. Additionally, a reputation for poor hiring choices can deter potential talent from seeking employment with the company, as skilled professionals typically seek workplaces renowned for strong team dynamics and positive work environments. Thus, the repercussions of a bad hire can extend beyond immediate operations, making it difficult to attract both future business and the high-caliber employees needed to drive ongoing success.
Avoiding a Bad Hire
When it comes to avoiding a bad hire, your hiring process is your primary line of defense. Taking the time to create a thorough and effective recruitment strategy can save your organization from potential losses in the long term. Ultimately, prioritizing quality over speed is essential when it comes to recruiting new talent for your organization. If you are looking to streamline your hiring process, Award Staffing can help. Contact us to learn more about our recruitment and hiring services today and see how our expertise can benefit you.