Why the Cost of a Bad Hire Is More Than What You Think
Whether you are a startup in Silicon Valley or a direct-selling business trying to scale your company, it’s always critical to hire home-run employees who can deliver results for your business.
It is a given that all recruiters strive to get the best candidates for any given position.
But what happens when a business ends up making a bad hire?
The costs associated with hiring the wrong person prove to be considerable. In fact, Zappos CEO Tony Hsieh once stated that bad hires have cost the brand as much as $100 million!
Moreover, the US Department of Labor records that the cost of a bad hire could be tantamount to 30 percent of an employee’s annual salary.
These numbers suggest that whatever the size of an organization, investing in someone who isn’t a good fit for any position can be a serious threat to the business.
Here are some of the ways that a bad hire can negatively affect your business:
Disengagement is contagious
The familiar saying “A bad apple spoils the bunch” speaks a lot about how a bad hire affects the whole group.
The concept of emotional contagion, where an individual’s positive or negative energy influences others, can be a reason why employers sometimes have a hard time overcoming disengagement.
When a disengaged hire is unable to (or unwilling to) pull their weight, other employees tend to get burned out compensating for the inefficiency.
One bad hire can increase turnover
The key to a well-functioning organization is to have employees collaboratively working and solving problems together.
But a single bad hire could wreak havoc on the whole composition of a company by pushing good employees to quit.
A recent survey conducted by CareerBuilder found that 50 percent of employers who made a bad hire mention that the bad hire could not work well with co-workers.
The situation is bad enough as it is, but it can be even worse if the bad hire happens to be a team leader or manager—just like what Falon Fatemi, CEO of Node, experienced in her team when a function leader caused two (almost three) key employees to quit.
The Cost of a Bad Hire
While it can be hard to put an actual figure on how much it costs to suffer from low morale, there are findings that show how significant financial costs are whenever your company hires the wrong person for the job.
The same CareerBuilder survey puts the current price tag of a single bad hire at about $25,000 or higher for nearly half of companies. Meanwhile, 25 percent of businesses estimate that the cost is double that amount, or even higher.
The figures may vary, but they all point to the fact that making a wrong hire can be quite costly for your business.
Reduced productivity, errors, and even the increased likelihood of turnover could all drain valuable resources from your bottom line.
Given the abovementioned consequences, it’s clear that bad hires must be avoided if you want your business to flourish.
By applying comprehensive screening processes, being clear about your hiring policy and requirements, and ensuring that the potential hire fits well within your team culture, you can be sure that the right people will be the ones stepping inside your organization.