The Cost of a Bad Hire

If you’ve ever picked the wrong person to join your organization, you know this can be an expensive mistake. But, exactly how much does a bad hire cost?

Zappos CEO, Tony Hsieh, famously stated bad hires had cost his company “well over $100 million.” (Forbes, 2016) As for the actual dollar value for your business, that depends. You need to consider not only the cost of finding another new employee, but also the damage caused by the poor hire. Estimates range anywhere from $7,000 to $250,000 per worker.     

Who Wants to Start Over?
When someone doesn’t work out, you’re back at square one. Recruiting and advertising can be expensive, while interviewing and checking references take up the time and resources of your regular staff. Not to mention, you once again find yourself short-handed.       

What Are the Additional Costs of a Bad Employee?

Higher Turnover – Bringing the wrong person into an organization can create a ripple effect. If the bad hire makes someone’s life more difficult, that person may find another job. Other co-workers follow suit, and suddenly your company has retention problems.

Decreased Morale – A low-performing employee can lower the bar for everyone. One individual can try everyone’s patience and spread bad habits. This scenario can lead to burnout and disengagement.

Lower Productivity – Higher Turnover + Decreased Morale = Lower Productivity. As workers leave, they take their knowledge with them. Projects and production fall behind. Employees are less motivated and less loyal. Obviously, this paints a worst-case scenario. However, keep in mind, a few minor incidents can quickly spiral and negatively affect your overall profits.

Reputational Damage – Poor hires interact with co-workers, managers, customers and the outside community. Therefore, they can cause harm in multiple ways. Disgruntled colleagues may encourage their friends and acquaintances not to apply at your organization, and thus chase away talent and hurt recruiting efforts. A customer or community member who has an encounter with a rude or incompetent employee is likely to take their business elsewhere, tell others about their poor experience and/or leave negative reviews online. Once again, the bad hire can rapidly impact your bottom line.       

Termination Expenses – Finally, firing or letting an employee go isn’t straight-forward. Depending on the circumstances, your organization may need to provide a severance package, pay unemployment compensation benefits or even face litigation fees.

Would You Like to Hire Smarter?

What can your company do to avoid the excessive cost of bad hires? Begin by re-evaluating your hiring and interviewing processes. If you need additional advice, partner with a trusted recruiting service.

At Connectology, we connect Midwest manufacturing businesses with top-level talent and optimum results. Let us help you Find Your Next Great Employee today!