Unexpected Costs of a Hiring Mistake

October 23, 2020

Your employees are the lifeblood of the company, and a bad hire can impact your organization in a severe way.  We’ve all heard the stories, and some of us have even experienced it either directly or indirectly.  There is a broad range of costs associated with hiring the wrong candidate, and the symptoms are usually a combination of the following: production loss, lack of stated skill (or level of skill), failure to meet KPIs, bad attitude, and/or constantly disagreeable, constantly tardy or absent, repeating mistakes, continuous poor customer and/or performance reviews.  

So what is the true cost of a bad hire?  According to the US Department of Labor, a bad hire can cost your business 30% of the employee’s salary.  There are other estimates, depending on the industry, that range from $200,000 to $900,000 and try to include hidden costs like onboarding and training. Beyond that it’s not just the loss of productivity, it’s the stress it puts on the team and leadership. These unexpected costs can be severe, affecting team morale and sometimes the employer’s brand.  For a larger company, it is disruptive but for a startup, it could mean the end of the company.  

We have identified the costs of a bad hire, but what can you do to prevent it from happening in the first place, or mitigate the cost an impact it can have if left unaddressed? 

When recruiting/interviewing candidates, proper data and diligence are crucial to success.  Learning more about soft skills and how a person will interact with the manager and team goes a long way.  Onboarding, training, and constantly measuring/reporting can help avoid these mistakes as well.  If this issue has impacted your team, here are a few things you can do:

1) Identify the problem and the reason.  Evaluate and document performance.  Identify trends and decide if they are due to processes or the employee.  

2) Have a discussion with the employee immediately.  Discuss your concerns, find out if they have concerns, and allow time (and a path) to correct the issue.  Sometimes expectations from the manager and/or employee simply aren’t being met.  

3) If needed, adjust the employee’s responsibilities.  They may be a great employee, just not suited for that position.  Attitude and work ethic can’t be taught, and are critical to success in any role.  

4) If you’ve implemented corrective measures, communicated and measured properly and it still isn’t working out, it may be time to terminate.  Be kind, honest and direct.  Termination in higher-level positions is rare, but more common in early-career stage roles.  Those are more difficult to hire, and require more onboarding and training.  

Let’s not forget the impact on the individual as well.  A bad experience with an employer can cost you time, money, and reputation.  Often, the next manager will ask what happened.  Be prepared for that question.  We all make mistakes, and in the rare event it didn’t work out, own it and take full responsibility.  Some of the best lessons in life come from hardship and mistakes.  It’s ok, learn from it and treat every day like it’s an audition.  

Be great and make a positive impact!

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