The cost of a bad hire - Emptor

It is inevitable that employers seek to hire workers to ensure that companies operate efficiently. However, most of the time, they do not take the time to conduct a good hiring process, and this presents great risks.

While it is true that there are cheap and easy methods to solve this type of problem, when an employer makes a bad hire, the damages can generate significant costs to the company. In this article, we will analyze these costs.

General Financial Costs

An estimated figure for the costs of a bad hire is around 30% of the expected earnings of the employee’s first year, based on the fact that time and money are needed to hire and then onboard new workers.

The hiring process can include reviewing resumes, conducting interviews, and having internal discussions with the team to be able to make a decision on which candidate or candidates should be hired. This can be a long and complicated process. The onboarding and adaptation time of the worker usually takes a couple of weeks because they must sign several documents, read the company’s policies, and become familiar with the company’s system in order to start working.

Once the onboarding and adaptation process has been completed and the new worker has started working, it is likely to take some time before management realizes that the new hired worker does not fit the company in one way or another. Meanwhile, they will continue to be paid a salary and cause the company to lose time.

Once the person is fired, the hiring and onboarding process starts again, which requires time and other resources. This can be a damaging cycle, not only financially, but it can also affect other areas.

Some Ways Bad Hires Can Affect Your Business

Training costs: When you hire someone new, you must invest time and money in training them. If the person does not fit well, you will end up wasting resources on training that will ultimately not be useful.
Reduced productivity: It is possible that a bad hire cannot complete tasks as quickly or effectively as other employees. This can lead to missed deadlines, reduced quality, and an overall decrease in productivity.
Damage to company culture: A bad hire can lower morale and cause tension among team members. This can create a toxic work environment that can be difficult to overcome.
Turnover costs: If a bad hire does not work out, you will have to start the hiring process again. This means more time and money spent on recruiting, interviewing, and training a new employee.
Financial losses: All of the previous factors can add up to significant financial losses for your business. In fact, according to a study by the Society for Human Resource Management (SHRM), the cost of a bad hire can range from 50 to 60% of the employee’s annual salary.

Negligent Hiring

One of the potential reasons for firing an employee is if an incident occurs in the workplace that causes harm to another worker. It has been estimated that two million people are victims of workplace violence each year. If the worker harms another person (within the scope of work) and had a history of violence, the company can be sued and held liable for negligent hiring. A lawsuit of this type can be very costly for an employer.

Other Costs

A bad hire can have a negative impact on the company’s work environment and undermine the morale and productivity of team members. If the negative impact is significant enough, key team members may seek new opportunities elsewhere. The decrease in productivity and/or the loss of these key members certainly have a negative financial impact.

The company’s reputation can also be affected in various ways, as any type of criminal activity that occurs in the workplace invites bad publicity, which opens the possibility of customers leaving and greater difficulty in hiring top talent.

How to Avoid Bad Hires?

Now that you understand the impact of a bad hire, let’s look at some ways to avoid it. Here are some tips to ensure you’re hiring the right people:

Define the role: Before starting the hiring process, make sure you have a clear understanding of what the job entails. This will help you identify the skills and qualifications needed for the position.
Conduct behavioral interviews: Behavioral interviews are an excellent way to get a sense of how a candidate will perform in the role. By asking questions that require the candidate to provide examples of how they handled similar situations in the past, you can get a sense of their skills and work approach.
Check references: Always verify a candidate’s references. This can help you confirm their skills and qualifications, as well as give you a sense of their work style and personality.
Use skills assessments: Depending on the role, you may want to use skills assessments to test a candidate’s abilities. This can be an excellent way to ensure the person has the necessary skills to do the job.
Focus on cultural fit: A poor cultural fit can be just as damaging as a lack of skills. Make sure to evaluate whether the candidate’s values and work style align with your team and company.

What to Do If You’ve Made a Bad Hire?

Even with the best hiring practices, it’s possible to end up with a bad hire. If this happens, here are some steps you can take:

Address the problem quickly: Don’t let a bad hire linger. If you’ve identified the issue, act on it as soon as possible.
Provide feedback: Make sure to provide clear and constructive feedback to the employee. This can help them improve and adjust their performance over the following months.

If a company makes a bad hire, it should address the situation as soon as possible by providing the employee with feedback and training to help them improve. If the employee cannot improve, it may be necessary to terminate their employment.

How to Avoid These Costs?

These costs could have been avoided, or at least reduced, through proper due diligence at the time of hiring. All new employees should be subject to a background check before any official hiring to protect the company from future harm.

Emptor can provide companies with fast and reliable background checks so you can be sure you’re hiring the right people for the job.

We invite you to schedule a free demo to learn how Emptor can streamline your hiring processes so you can work with people you can trust.