Cost of a Bad Hire
The cost of hiring and finding a new employee is estimated to be around a quarter of a million dollars according to SHRM. This does not include rectifying if this new hire does not work out or the additional costs associated with that. Not only are you looking for the best candidates to help fulfill business needs, but you are not wanting to take on the risk and cost of hiring a bad employee.
Sometimes this can be out of your control and nothing is more disappointing than knowing that the person you hired turns out to be completely wrong. Even when you hire a bad employee, this person could influence other people in your workplace to have the same mind set which would cause even more issues.
The cost of a bad hire is calculated per the following items:
- Recruiting ( Advertising, job boards, sourcing, staff time etc.)
- Onboarding ( Background checks, paperwork, staff time, etc.)
- Training Fees
- Relocation Packages
- Replacement Fees
- Impact on Team
- Bad Customer Service
- Litigation fees
The biggest question to ask yourself is why do we keep making these mistakes? Most of the time it can be an honest mistake, but it could also be that companies may feel rushed to fill a position. Over 43% of employers have said they wanted to quickly fill a position for the need of the business according to CareerBuilder. This sense of urgency could be from an employee quitting suddenly or a need for a new project to be completed. By rushing to fill a position, companies overlook the pros and cons and end up hiring someone who is not a good fit at all.
This rushed behavior can also produce a lack of proper interviewing for an employee. By using standardized or behavioral interview processes, a company can determine if a candidate is a good fit or not. By looking for red flags in the answers and understanding how this potential new employee thinks and acts could determine a lot of things.
With so much cost on the line, it would be important to make sure you are well versed in recruiting and HR functions. An alternative would be to work with a staffing company who specializes in finding the right talent for your company culture and needs. This is a cost-effective solution that is beneficial and smart for your business.
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