What bad hires really cost companies

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Cost of a bad hireAccording to a new CareerBuilder study, 69 percent of employers report that their companies have been adversely affected by a bad hire this year, with 41 percent of those businesses estimating the cost to be more than $25,000, and 24 percent saying a bad hire cost them more than $50,000.

“Whether it’s a negative attitude, lack of follow through or other concern, the impact of a bad hire is significant,” says Rosemary Haefner, vice president of human resources at CareerBuilder. “Not only can it create productivity and morale issues, it can also affect the bottom line.”

What’s driving up the cost of a bad hire?
The price of a bad hire adds up in variety ways. According to the survey, the most common money-sucks that result from a bad hire are:

  • Lost productivity (39 percent)
  • Lost time to recruit and train another worker (39 percent)
  • Cost to recruit and train another worker (35 percent)
  • Negative effects on employee morale (33 percent)
  • Negative impact on clients (19 percent)
  • Fewer sales (11 percent)
  • Legal issues (9 percent)

What defines a “bad” hire, anyway?
When classifying what makes someone a bad hire, employers report several behavioral and performance-related issues:

  • Quality of work was lackluster (67 percent)
  • Failure to work well with other employees (60 percent)
  • Negative attitude (59 percent)
  • Attendance problems (54 percent)
  • Complaints from customers (44 percent)
  • Failure to meet deadlines (44 percent)

Why do bad hires happen to good people?
When asked what accounted for the bad hire, survey participants report the following reasons that led to their hiring mistakes:

  • Needed to fill the job quickly (43 percent)
  • Insufficient talent intelligence (22 percent)
  • Sourcing techniques need to be adjusted per open position (13 percent)
  • Fewer recruiters to help review applications (10 percent)
  • Failure to check references (9 percent)
  • Lack of strong employment brand (8 percent)

Twenty-six percent of employers say they weren’t sure why they made a bad hire and that sometimes you just make a mistake.

How to avoid making bad hires: Readers and experts weigh in
The following advice on dealing with bad hires comes from readers and experts of The Hiring Site, an online community for hiring professionals. 

“Part of hiring well comes down to who’s doing the interviewing. There are some people who can hit a fast ball and some people who can’t. Likewise, there are some people who are great at interviewing and some who aren’t. There’s some element of natural talent there. And that realization has had a profound impact on my company. It used to be, when I hired, only 30 or 40 percent of the people I hired worked out great, and now it’s up to 80 percent. And that’s because we’re much better at hiring.” – Jay Goltz, author of “The Street-Smart Entrepreneur”

“In many companies, recruiting processes have trended toward 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.” – Michael Howell, The Hiring Site reader

“The way to avoid ‘rushing to hire’ is to not wait until there’s an open requisition to recruit for. Continuous recruiting by your current employees and hiring top talent when you find them — not when you desperately need them — is the key.” – Rod Swartwood, The Hiring Site reader

“When I think of why people don’t succeed, it’s not because they don’t have technical skills. It’s because of those intangibles that don’t come up in interview that are hard to judge.” People who worked with that person know [if the candidate has those intangibles].” – Kevin Ryan, Gilt Group CEO, on the importance of checking references

“Most supervisors aren’t taught best practices in hiring, not to mention employee management … 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.” – Dianne, The Hiring Site reader

“You can bring someone off the street [to replace a bad hire], but it’s not going to guarantee you’re going to find someone any better, especially if you haven’t done any of the internal organizational work to prevent you from hiring the same type of person.” – Anne Loehr, author of “A Manager’s Guide to Coaching,” on avoiding making the same hiring mistakes over and over

2 Comments
  1. This is great information about how essential it is to focus on hiring the best people. A bad hire can really cost a company in both time, lost productivity, and most importantly in dollar bills. This is why it’s so important to focus on finding great people in the hiring process. Whether you’re interviewing someone in person or through online video, use the interview as the place to really delve into what makes them the right person for the job. Don’t rush to make a judgement, or you could end up with a money pit and a position that needs to be filled again.

  2. This is a great summary. We published an article by new_resource  a week ago on the same topic. “You’re going to experience turnover, it’s as sure as the sun is in the sky.  You can mitigate your risks by developing retention and recruitment strategies that avoid costly hiring mistakes.” Check it out!

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