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Cost of a Bad Hire: What a Bad Hire Can Cost You

How much is the cost of a bad hire? The average cost of a bad hire is up to 30% of the employee’s first-year earnings according to the U.S. Department of Labor. However, one report from the CEO of Link Humans put the average cost as high as $240,000. This is determined by hiring cost, retention cost, and salary. In order to better understand the issue, let’s break it down


How Hiring a Bad Employee Costs you More

Bad employee hiring

 

1. Productivity

A bad employee may decrease productivity by slowing down the processes. This may occur for various reasons – lack of expertise, incompetence, or poor culture fit.. This can become a serious issue especially if an employee holds a highly responsible position or works in a team where each member’s efficiency is dependent on their peers. In other words, the cost of a bad hire can be the failure of the whole team and project. Large companies usually can bear the cost of those  outcomes but  smaller companies cannot. For example, IT is a sphere where the cost of a bad hire can be quite expensive. It is wise to have a well-prepared strategy adapted to the field or trust professionals of the field. In addition to a creating a solid hiring process up front, it’s also wise to craft  strong employee retention strategies. 

 

2. Reputation 

Bad employees can also harm a company’s reputation. Regaining reputation or credibility can sometimes take longer than recuperating financial loss. Generally clients and partners care for the end result and bottom line. However incompetence or lack of ethics can lead to an irrevocable loss. Every sphere or industry is unique, as are the risks and challenges they face. In this case we are considering the potential effect of incompetence in a company, which can lead to the delivery of a bad product. A bad hire can the company’s reputation amongst partners, clients, and potential employees. 

3. Sales

The recruitment of a specialist in some cases is a long-term strategy, but in other cases, quick solutions may be needed. Sales can be outsourced to short-term temporary employees. If a potential sales candidate becomes a bad hire, the company can risk sales reduction and unrealized profit. Smaller teams and companies are more vulnerable to this as well. It is recommended to review recruitment processes, e.g – interviews


How to Avoid Bad Hiring

Bad employee

 

1. Make a value list

Every potential employee has both good and bad traits. The mission is to select candidates that share the same values and visions as the team/company. For example, if creativity is a priority for you, you can challenge the applicants with the following questions which promote creativity. Creating a hiring process that’s in alignment with your company’s mission statement and core values will help narrow down candidates who will stay on with your company and bring high value over a long time.

 

2. Take Time 

Sometimes signs of a bad employee may include lack of interest in whatever they do. In other words, the job is a means for them to get paid and nothing more. As a result, sometimes two candidates with equal expertise but different levels of interest and work ethics can show opposite results. To ensure that you are working with the right people, it is crucial to allocate sufficient time to not only to consider a decent volume of candidates, but also evaluate each one thoroughly. It is recommended to build your interview and recruitment processes with an emphasis on longevity.

 

3. Partner with a recruiting firm

A poor choice in hiring can be costly, therefore there are recruiting companies specialized minimize risks and maximizing support. For example, HIRECLOUT exclusively specializes in hiring mid and senior level engineers for high-growth B2C and SaaS technology-focused tech companies. These companies solve problems across modern web/mobile UI, distributed systems, cloud, data ingestion/processing, and automated testing/deployment. This means that the company will only take on roles within that area of expertise. Each HIRECLOUT recruiter specializes in only 2 core skill sets within this niche and there are always at least 2 recruiters available who specialize in your required skill area. This ensures that the company can cover your search with depth, conduct higher quality interviews, and have access to a strong network of relevant candidates at all times.

 

In summary, if you are looking for your ideal candidate, always remember to measure twice and cut ones. It’s better to spend more time and money on a meticulously organized selection process, rather than make a quick decision and suffer from its results afterwards.