The cost of a bad hire? And how to avoid making them

The cost of a bad hire? And how to avoid making them

Nick Wilson
Nick Wilson
September 27, 2023

Have you ever made a hiring decision that you later regretted? If so, you're not alone.

We delve into the real cost of bad hiring decisions and how to avoid making them.

Many employers have faced the daunting reality of realizing that a new hire just isn't the right fit for the team. But it’s not only about the misfit, it’s about the costs associated with it. Today, let's look into the true costs of a bad hire and chat about a few simple ways to avoid them in the future.

The estimated cost of a bad hire is 30% of the employees yearly salary, yikes! But in some instances it can be far more than that. Zipia

First things first, why is making a bad hire so costly?

Well, besides the obvious expenses like salary and recruitment costs, there are also numerous indirect costs that can hurt your business. A poor hiring choice can lead to reduced morale among your existing team. Imagine having a superstar team that has to slow down because a new member isn’t keeping up. That’s a recipe for frustration.

The Direct Costs

  • Recruitment and hiring costs: The cost of advertising the position, screening candidates, and conducting interviews can add up quickly. Luckily if you are working with a good recruitment agency they should provide you with a replacement gaurantee.
  • Training costs: Once you've hired someone, you need to invest in training them so they can do the job effectively. This can include the cost of training materials, instructor fees, and lost productivity of staff training on the job.
  • Lost productivity: A bad hire is going to be less productive than a good hire. This can lead to missed deadlines, poor quality work, and unhappy customers.

-** Turnover costs:** When a bad hire leaves the company, you have to start the hiring process all over again. This can be costly and time-consuming.

The In-direct Costs

In addition to the direct costs, there are also a number of hidden costs associated with a bad hire. These costs can be more difficult to quantify, but they can be just as significant. Some of the hidden costs of a bad hire include:

Low morale: A bad hire can create a negative work environment for everyone. When people see that someone who is not performing well is being rewarded, it can lead to resentment and frustration.

Damage to customer relationships: A bad hire can damage your relationships with customers. If a customer has a negative experience with one of your employees, they are less likely to do business with you again.

• **Damage to reputation: **A bad hire can damage your company's reputation. If word gets out that your company is hiring people who are not qualified or competent, it can make it difficult to attract and retain top talent.

Now the good part, How to Avoid making bad hires in the first place!

The best way to avoid the making bad hires is to do your due diligence and screen candidates carefully. Here are a few tips:

Start with a clear job description: This will help you to identify the skills and experience that are required for the job.

Create a bulletproof hiring process: Don't rely on just an interview and gut feel to get to know a candidate. Use a combination of interviews, an internal scorecard, reference checks, and skills assessments to get a complete picture of the candidate.

Creating a hiring process for your business does take time and a few attempts to know what the key criteria are but once you know exactly what you are looking for and investigating the decision making becomes much easier.

Be honest about the company culture: Don't try to sugarcoat things or make the company seem more glamorous than it is. This will help to ensure that you attract candidates who are a good fit for the company culture.

Have a clear strategy for the role: So often companies hire without a clear strategy for how this person will add value to the team. This is often the case in rapidly expanding start ups or new roles that are here to help a team but often the role or the goals aren’t well defined.

Hire slowly, fire quickly: It's better to take your time to find the right person for the job than to rush into a hiring decision and end up with a bad hire. Unfortunately sometimes we need to get rid of people and its best for all sides if this is done quickly.

Hiring a new team member is an important decision, but it doesn't have to be daunting. By following these tips, you can avoid the mistake of making a bad hire and find the best possible person for the job.

Lastly if your hiring process isn’t well defined or you just don’t have the time find the right recruitment agency to work with. One that knows your industry well and you can build a lasting relationship with. The more time you spend with one agency the better for you and them.

StreamTalent pride ourselves on being an agency who work closely with our customers to truly understand their businesses so that we can act like and extension of your team. We can help you hire the best people for your team.

Nick Wilson
Nick Wilson

Product and Operations Leader at Stream. Looking to blend recruitment and technology to help people find the right jobs more easily.