The Cost of Hiring a Bad Employee

The cost of a hiring a bad employee can cost your firm big dollars, cost customers, and affect other employees. A bad hire can also affect your small business more significantly than it can a larger business.

According to a survey of employers, 41% of companies say that at least one bad hiring decision cost them in the range of $30,000.  25% of companies from the same survey estimate the cost of bad hire to be $60,000.

What are the costs?

The high costs are due to interview expenses like training and orientation, termination costs and legal costs if hire decides to sue.  Mostly the high costs are due to repeating the hiring process.

Not surprisingly, many companies large and small hire bad employees. The biggest costs to the companies surveyed:

  • 41% lost productivity
  • 40% lost time to recruiting and training a replacement.
  • 37% expense in recruiting and training another worker
  • 22% negative impact on client solutions

The aforementioned issues will likely cause a new hire to leave within a short period say 2 years or less. Then the employer repeats the process all over again.

The result is lost productivity and lower staff morale. It is the remaining staff who have to pick up the extra work when an employee leaves.

This, in turn, leads to staff burnout and more sick time being used.

Why do companies hire bad?

Everyone endeavors to hire quality staff, however, mistakes do happen. Some companies made a bad hiring decision because they needed worker quickly.

While others said the company didn’t test the skills well enough and a minority, 11% companies didn’t adequately check references.

Finding the right match requires time and attention, something busy managers have to take the time to do well. Most times, though, the job definition and criteria for the job are different.

Many managers make the mistake of hiring based on gut feeling or liked candidate. Only later do those managers find out that the candidate was not great at the position.

How to avoid hiring a bad employee

Hire someone to interview great employees if you are too busy. The cost of hiring a professional recruiter can be more than offset by hiring a good employee.

Not everyone is great at everything and it is important to know and work your strengths.One way to avoid a bad hire is to check all references.

If a reference is hesitant to say anything about the new hire, that is a red flag. According to the Harvard business review 80% of employee turnover due to bad hiring decisions.

Another way to avoid hiring a bad employee is to make new employee comfortable by making great first day and announcing to rest of team about the new hire.

There are many reasons for hiring a bad employee. Simply put, it is hard to quantify costs like lost sales, reduced employee morale and lost customers.

Software as a hiring solution

A new trend is emerging and that is the rise of Applicant Tracking Systems. Applicant tracking system handles the recruitment process and sorts through thousands of resumes. The purpose is to find the best candidates and it helps employers keep track of hiring process. Applicant tracking systems look for keywords in descriptions to filter out bad hires.

The applicant tracking system is not perfect and sometimes candidates eliminated because of some wrong reasons.

Maybe a candidate was downsized from a large firm and now has to survive on small short -term gigs. The resume still should be read by a human to get more insight into the candidate.

A common complaint among applicants is the applicant tracking system eliminates good candidates because the candidate did not put certain ‘keywords’ in the resume.

That in and of itself guarantees that the company will be hiring a bad employee.

How to hire good staff

A new trend is emerging in recruiting; test drive new hire with a sample assignment gives both parties a chance to see if new hire can do the work they said they could do.

This new system minimizes the chances of hiring a bad employee.

The advantage to using a test drive is it gives employer chance to see if new hire will fit in. A ‘working interviews’ gives the employer and employee a chance to see if candidate fits in

It is a good idea to discuss the new hire’s career path at the company and discuss advancement opportunities as soon as possible. Provide continuing education service to help get employees there.

Under promise and over deliver, Rudolph Giuliani is famous for saying. The employment landscape is littered with employees and employers who over promise and under deliver.

It’s a good idea to check in to see how everything is going and be quick to put out any fires that may crop up.

This will minimize the chances of hiring a bad employee.

If you need help in deciding if you need to hire another staff member, contact Mathew today (289)-500-1978 or info@accountingprofessionals.ca