Bad Hires Cost an Average of $15K — Let’s Break It Down

Bad Hires Cost an Average of $15K — Let’s Break It Down

A great hire can make an impact, drive higher productivity rates while sparking deeper collaboration, and bonus, stronger team chemistry. Finding the right talent who checks all the daily-responsibility boxes, has the right experience, and fits your company culture like a glove can drive results extending company-wide. It makes the hours agonizing over writing the perfect job description, sorting through applications, days in interviews, and eventual negotiations all worth it—for you, your team, and your business. 

And of course, there’s that satisfaction months later of being told—over and over again by your manager and peers alike—that “Jill was a great hire, we need to find more like her”. 

But, unfortunately, bad hires happen also, to all of us. And it can be challenging pinpointing the exact cost of a poor hire. While the wrong fit can impact team morale, bring collaboration and big-picture initiatives to a halt, or worse, increase company turnover, they also cost employers a lot of money every year. 

I mentioned in a previous blog that Zappos discovered they were losing $100M on bad hires. Their leadership team was so set on reducing costs related to hiring the wrong employees that they offer employees a $3,000 “separation bonus”. What’s that? It’s the buffer they pay to employees who aren’t fitting or loving the organization within the first few months of hire.  

The U.S. Department of Labor reports that the cost of a poor hire usually ticks up to about 30% of their income. Other reports have put the cost north of $200K in company expenses.

Here are three ways the wrong hire can cost your company: 

1. Let’s talk dollars.

Hiring costs rack up a lot faster for the wrong hire. Again, the average cost for a bad hire is at least 30% of the employee’s first-year earnings—think how that makes an impact with an executive salary. Also, research has shown that it can also cost employers profits, 10% to be exact in lost sales opportunities. 

Add to that the cost of placement or advertising for the position online and outside recruitment fees. Besides, those smaller expenses like background checks and drug screens can add up also. Combining all those numbers you can see the fiscal burden of a bad hire, but unfortunately, it doesn’t end there.

2. Think about company culture—that’s priceless.

We’ve talked about how the right company culture can set you apart from other employers even in the most competitive hiring markets. It’s also a great retention builder to avoid burning through good hires and losing the talent you want to keep.

Statistically, the wrong hire can be disruptive to that culture and potentially cause up to a 32% drop in employee morale. The wrong hire can be damaging to both internal and external relationships—that means it can impact turnover rates and your client relationships which can cost a lot more financially.

3. Look at productivity too. 

We know that time is money, right? Keeping your workforce collaborative, connected, and productive is more imperative and in some ways more challenging than ever in our remote-from-anywhere new normal. So, let’s look at some stats.

These numbers pre-date the fast rise of the remote workplace. Because having the right fit is essential to productive communication and meaningful collaboration. So, imagine taking these numbers up by at least 20% with your connected workforce.

Making the wrong hire can cause a 36% productivity drop. Not only is that a serious time killer, mis-hiring can impact your bottom line when sales and profits are riding on promptness and follow-through which is… you know, always. And then there’s the lost time spent on recruitment too. Hiring a replacement for the wrong hire costs time, a lot of it, estimated at 40% lost time in re-recruiting and re-training hours. 

How can you avoid bad hires?

Wrong hires are sometimes inevitable. You can have a job candidate who is flawless on-paper, walks on water through every interview, and falls comfortably into your salary range. But then sometimes the too-good-to-be-true hires are, and they show some alarming red flags once they’re on the job. It happens to everyone. Luckily, there are some ways to avoid the nightmare of mis-hiring.

First, focus on the details. Make sure you are dedicating enough time to spell out the day-to-day responsibilities and team dynamics with the right job description. Be upfront about the role, company, and team dynamics, and exactly what performing at or over expectations entails. 

Interviews can be a good way of filtering out company cultural no-gos and pinpointing prime hiring material. The right interview questions help you gauge cultural fit and assess each potential hire using critical criteria for the role and your company. 

Go way beyond skills and experience to ask them questions about team dynamics and what they look for in a company. In other words, try to see if they’re the right cultural fit for your organization. Your hiring strategy might also include interviews with multiple team members who candidates would interface with regularly. Get their feedback on team fit—having their buy-in can also help with a more seamless transition process when you’re ready to onboard your new hire.

Lastly, just shy of 20% of organizations now use some type of personality testing on their final-round candidates to ensure they gel with other team members while supporting their position and a productive workplace. 

Finding the right recruiter helps!

Wow, that’s a lot to navigate! Making great brag-worthy, game-changing hires isn’t easy. If you’d like some expert support, at Staffing Strong we can help you find the right marketing, creative, digital, engineering or HR hire the first time. Contact us to get started!

Meet the Author

Evelyn Vega is the Founder and President at Staffing Strong and the Past President of the Phoenix American Marketing Association. Since 1999, she’s made her career about supporting her clients in building meaningful careers and partnering with businesses in finding quality hires. In her free time, Evelyn sits on various advisory boards and enjoys practicing on her drum set!

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