The True Cost of a Bad Hire

Hiring is one of the most important decisions that managers and leaders will make. Not only is it important for the short-term plans of your company, but bringing top talent to your team can make the difference for the future of the company. What happens when a manager gets the hiring wrong? It’s not uncommon that managers make mistakes when hiring. In fact, 74% of employers admitted they have made a bad hiring decision. Monetarily, a bad hire can cost around 30% of the employee’s salary. Bad hires don’t only incur monetary costs, they also include other costs. Considering three-quarters of employers make mistakes, what is the true cost of a bad hire?

Making a hire requires time and money. Dedicating these resources to making a great hire is no problem as they are an investment in top talent. However, when a hire turns sour, those costs become negative. Think about the effort and resources a manager puts into the onboarding process getting an employee up to speed. A lot of time is spent on the onboarding process with activities like assigning the new employee a mentor, setting up their workspace with office supplies, specific trainings, and meeting with different teams. Time is money and when a hire turns sour, that time is lost.

A poor performer requires more time and effort from a manager. Every new hire requires careful management to get them up and running. However, a bad hire can increase the energy spent on managing that employee. The extra energy expended on managing that employee can be costly for a manager and leaves the manager spread too thin on all of their responsibilities.

When a manager makes a hire and that hire turns out to be a poor performer, the team’s productivity takes a hit. Imagine your team as a well-oiled, highly productive machine. When one part of that machine is performing well-below standard, the whole machine’s productivity goes down. This in turn becomes costly for your company in terms of revenue or service provided.

After carefully cultivating a strong culture, when a manager brings in a bad hire, it becomes costly for that culture. When a bad apple joins the culture, they can poison the whole team. The bad hire can destroy team chemistry and cause the other established team members to lose motivation. It is also possible that the employees lose trust in the ability of the manager to bring in top talent that will carry the team forward.

Depending on what position you are hiring for, hires that are client/customer facing can be especially costly. A bad hire that is working in a customer service position can lead to a decrease in customer satisfaction. The loss of clients or customers because of the actions of one bad hire are costly in terms of future business with a client and bad reviews from those clients.

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