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The real cost of a bad hire

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01 June 2019 by Rachel Whalley
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hiring cost

When it comes to hiring a new employee for your business, there is always pressure to fill ​the position as quickly as possible. Despite this pressure, we all know that by rushing a process the chances are we won’t be able to secure the best candidate for the role - so why chance it?

A bad hire can be detrimental to a company, and can have a series of negative implications for your organisation - but most of all it can be costly. 20% of decision makers within a company are unaware of how much a bad decision can cost their company, which is why here at Intelletec we use our experience and expertise to minimise the risk of a bad hire for you.

So what is a bad hire?

There is always an element of risk when hiring a new member to join your team. Despite the lengthy interview process and multiple reference checks you invest in, you can still never guarantee that someone will be the perfect fit both for the role and the company until they are in post. That is why for small businesses, like us here at Intelletec, making hiring decisions involve a lot of consideration and careful planning.

When looking at the cost of a bad hire, a lot of organisations focus on purely the financial cost. However this is only one side of the story, Next Generation have outlined what they call the true cost of a bad hire, and you may be surprised by some of the impacts.

What is the cost of a bad hire?

Financial cost is the one often felt first - it’s an immediate hit. Here are a few hard hitting facts that bring home how a bad hire can impact your company financially:

  • The average cost of a bad hire is 30% of the employee’s first year earnings

  • Around 10% of sales opportunities are lost

  • 27% of UK companies say that bad hires have cost them more that £50,000

The effect on productivity impacts not only the bad hire, but also the rest of the team around the,

  • On average, hiring the wrong person causes a 36% drop in productivity

  • Hiring a replacement can be incredible time consuming - it accounts for nearly 40% of lost time in recruiting & training the new hire

Culture damage is often forgotten about, but it is integral to your organisation. A bad hire can disrupt team dynamics, and even cause a 32% decrease in employee morale. Hiring someone with a poor work ethic can increase the burden on other employees to pick up any neglected responsibilities - which in turn can lead to resentment and even conflict within otherwise productive teams.

Customer / Client relationships. In recruitment, we know that clients are, understandably, more likely to stay with recruiters who have longevity in their careers. This applies across all sectors, bad experiences are easily transformed into reputation nightmares for companies. Meaning that a bad experience with a bad hire, whilst not necessarily a reflection of your organisation, can become synonymous with your brand.

How to avoid a bad hire

  1. Precise preparation throughout the whole process: Write a detailed job description so candidates know exactly what the role entails. Be prepared to dedicate significant time to making the right hiring decision. If you are new to hiring make sure you have a support team, hiring can be 24/7 and needs dedicated staff

  2. Effective interviews: Assess the candidate against specific, predetermined criteria that is essential for the role. Ensure all interviewers know the essential questions needed, and stick to a structure. Evaluate each candidate on their skills and experience, as well as whether they are a good cultural fit for the company

  3. Consider different approaches: A good example of this is the introduction of Psychometric tests within an application process. In the UK 18% of companies currently use these tests to help them find well suited candidates.

Still concerned? Don’t be. At Intelletec we have a wealth of experience and expertise across various sectors and can provide you with the best possible support to avoid this. Get in touch to find out more.