The True Cost of a Bad Hire

February 20, 2015 Zuman

Many high-growth companies face tough competition for the best talent. When you finish the hiring process, you don’t want to have to do it all over again in a few months. While employee retention is an issue many employers have to deal with, choosing the wrong employees can lead to unforeseen costs. A new hire may not be a good cultural fit or doesn’t have the full skill set needed for the position. Quickly growing businesses often feel pressured to make speedy hiring decisions, but you need to get the best people in the right positions. How much does a bad hire really cost and how can you avoid making the wrong decisions?

CareerBuilder surveyed companies, and of those that said they had made a bad hire, 41 percent said the individual cost them at least $25,000 in the past year. One-quarter said a bad hire cost them $50,000. When you consider the recruitment and training costs for new employees, you won’t see a return on investment. Some businesses invest thousands of dollars and months of time bringing new employees up to speed. In addition, bad hires cost lost productivity and require managers to lose time on training. Bad hires also have a negative impact on morale around the office and can affect client relationships. It can even cause reputation damage.

What was the most common reason for making bad hires? Thirty-eight percent of respondents made a bad hire when they felt pressed for time and needed to fill the position as quickly as possible. Additionally, some companies didn’t thoroughly assess hires’ skills or conduct adequate reference checks.

How Can You Tell If a Candidate Is Being Honest about His or Her Skills?
Small fabrications on resumes are more common than you may think. Everyone wants their resumes to present them in the most positive way. While some job candidates may embellish a few skills, some go as far as making up references, according to Forbes. In fact, HireRight, a background screening company, studied resumes and found 50 percent contain anomalies. Thirty percent have fabrications on professional qualifications and education. If employers don’t have enough time to do their due diligence when making hiring decisions, it can lead to the wrong choice.

Because the cost of hiring the wrong people is so high, it’s important to take your time with the screening process to make sure you get the best people.

What Are the Characteristics of a Bad Hire?
Although a bad hire may look different for every organization and may even vary by department, many people who are a poor fit for your organization share similar characteristics, according to CareerBuilder. Many fail to produce the expected quality work or have trouble getting along with their teammates. They often have a bad attitude from the start, fail to meet deadlines and receive negative feedback from clients.

Since many of these are problems that come up only after someone has been extended an offer of employment, how can your hiring managers be sure they’re making the right choices? Conduct great interviews to get a better read on candidates.

What If Your Hiring Process Is Inherently Flawed?
Have you ever made a bad hire? Has your company recruited multiple people who didn’t work out? How much did it cost you in terms of the financial investments in this employee? How much productivity was lost? Because these issues are so costly, you may need to reconsider how you hiring key employees.

Human resources managers are often flooded with resumes and cover letters as soon as they post an ad for a job vacancy. The sheer volume of applications can overwhelm even the most skilled hiring manager, which leads many companies to filter resumes by specific keywords and degrees from highly ranked colleges, Backchannel stated. However, the college someone attended is often irrelevant for the specifications for the job. In many cases, people have the right skills and experience without an Ivy League education.

In addition, many firms in Silicon Valley operate under the pretense that a new hire needs to be a perfect cultural match for the organization. While workplace culture is important, focusing on it can leave hiring managers vulnerable to unnecessary biases. This can keep companies from hiring people with exceptional tech skills because managers are worried they won’t fit in, and the potential loss of expertise is detrimental to a growing organization. Employers are also biased against hiring candidates who have been unemployed for as little as four weeks, even if they were laid off through no fault of their own.

Adopting a people operations mindset and acknowledging your current hiring process is flawed can make a big difference. For example, Google stopped asking candidates for transcripts or grade-point averages, unless they were recent college graduates. The company found that this wasn’t a strong predictor of success on the job. Additionally, there was very little correlation between the scores given in an interview and how well someone did on the job. Although tech companies are often innovative industry leaders, many of them do not understand the hiring process.

You need to identify the most important information and find the right questions to ask candidates to learn it. This can help you make the recruitment process more effective so you can avoid bad hires,

About the Author

Zuman

Zuman is the premium solution for HR, payroll, benefits administration delivering superior control, lower risk, and enhanced employee engagement for growing companies.

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