The Hidden Costs of a Bad Hire

bad hire

Attrition is defined as, the gradual reduction of a workforce by employees’ leaving and not being replaced (attrition does not include employees exiting the company by being laid off or fired). Believe it or not some turnover is good. You want your unhappy and disengaged employees to leave.  Now no company wants really high turnover either, it points to a bigger issue – usually treatment, lack of leadership, direction, and of course, pay. Attrition is a specific type of employee turnover; from the company’s perspective, it is the unplanned loss of employees who have yet to be replaced.

The major problem with making a poor hiring decision really depends on the position, for instance you hire a CEO and that person does something unethical like sexual harassment, it could cost your company thousands, hundreds of thousands, millions or even total destruction.  It’s true once upon a time in my career, I worked for a small benefit company which was owned by a husband and wife. The husband was charged with sexual harassment, it was investigated and determined to be true. They filed bankruptcy and closed the doors.

A poor hiring decision means that company resources are spent inefficiently across all the costs of an employee: healthcare benefits, training, uniforms (if applicable) and statutory costs; there are state and federal costs such as FICA, Social Security and Medicare; not to mention, the time and resources spent in recruiting the employee.

bad hire

A poor hire can cost you money which you can calculate easily but it could also affect your workforce in ways that’s harder to figure out. If you hire a slacker, someone has to pick up that slacker’s slack – that represents a loss of productivity, increase wages for overtime, decline in company morale, and again, not to mention, the time and resources spent in recruiting the replacement.

A bad hire can have crippling effects on your employees’ morale. For instance, you hire a supervisor from the outside, and this person is not truly equipped to handle the job. There is a 100% chance that one of your incumbent employees will feel that they should have gotten that position over an outsider, and they will probably begin to the process of mentally checking out. One bad apple can ruin the bunch. Disengagement spreads through a workforce like fire over gasoline.

The trust between employees and employers is fragile – very fragile. One wrong hiring selection can be the straw that breaks the camel’s back. Employees will lose faith in the company’s intentions and feel insecure about their place within the organizations. They will begin to look for new jobs with competitors. The organizations reputation will be attacked internally and externally causing the company to lose out on top talent.

These types of costs aren’t as easily tabulated but they are far more detrimental to your production and expensive to your employer brand. When adding staff or filling positions be sure to analyze the essential job duties, and examine your current staff for promotable workers.  It’s always easier and cheaper to promote from within rather than to hire externally.

You’re going to experience turnover, it’s as sure as the sun is in the sky.  You can mitigate your risks by developing retention and recruitment strategies that avoid costly hiring mistakes.

 

chris fields Chris Fields is an HR professional and leadership guy who blogs and dispenses great (not just good) advice at Cost of Work. Connect with Chris via email at chris@costofwork.com.  

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Chris Fields Human Resources Consultant, Resume Crusade Chris Fields is an HR professional and leadership guy who blogs and dispenses great (not just good) advice at Cost of Work & ResumeCrusade.
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