Let’s cut to it: you already know how crucial it is to build a strong team to ensure your company will not only survive, but thrive. But what happens if you hire the wrong candidate?
What if you make a hire and that person leaves within the first 12 months?
Can one bad hire really cost your business?
Yes. And it might cost much more than you first think…
The financial cost of a bad hire
It’s important to hire the right talent the first time to save the financial cost on your business. It is estimated that a bad hire can cost up to three times more than the salary paid. (Yep, that’s right… 3x!)
So how does it add up to such a big financial cost?
- Wasted salary
- Wasted benefits
- Misspent recruitment cost
- Lost training costs
- Lower revenue (from a lack of productivity of new staff member)
- The cost of repeating the process!
And these are just some of the direct financial costs to getting it wrong. Let’s also consider the hidden and indirect costs of a bad hire…
The morale cost
The morale impact is a hidden cost to a bad hire. But it is just as important.
A bad hire could display toxic behaviours. This can hurt your current employees’ morale and wellbeing.
The bad hire might leave suddenly. This leaves their team mates with higher workloads and creates a poor work atmosphere.
A succession of bad hires may lead to employees questioning your ability to judge who is right for the company and increase employee dissatisfaction.
If this isn’t enough to worry you immediately (it should!), consider how these frustrations can easily grow, and result in:
- Additional staff turnover of current employees
- A negative company reputation or employer brand (According to glassdoor, a negative reputation can cost a company as much as 10% more per hire in 2021)
- A loss of business (as clients and customers receive a lower level of service)
Therefore, it is essential that you find new starters who will be a good fit within the team and your company culture. Above all, you need to form your opinion on whether the employee will perform well, enjoy the role, and stay for the long term. You must look beyond simply “getting a new hire into the role”.
The low productivity cost
A new employee will naturally work at a lower rate of productivity than experienced employees. In fact, it typically takes an average of 28 weeks for a new recruit to reach their optimal productivity in a new role.
So, when you take an experienced colleague out of their usual role to train or support the new recruit, this causes a significant dip in overall productivity of the team. It may even mean there’s a slight loss in revenue. (Of course: this is expected to balance out once the new employee is up to speed!)
A bad hire may mean this loss is never recovered. For instance, if their productivity doesn’t improve quickly enough. Or if the team is constantly being pulled out of their own roles to support the bad hire.
The time cost
In business, time is money. And hiring a new member of staff will take up your valuable time.
In fact, the average timeframe for hiring a new employee was 27.5 days in 2020 (according to Glassdoor). That’s nearly an entire month.
Let’s break that down into exactly how that time is used when hiring new staff:
- Preparing your business to take on employees (such as salary expectation and where the hire will sit in the team structure)
- Writing job specs and job ads to start the recruiting process
- Screening CVs
- Arranging and conducting interviews
- Giving feedback to unsuccessful applicants
- Checking references and other pre-employment checks
- Possible contract negotiations
- Onboarding and induction
- Planning the new staff member’s progression opportunities
Now imagine the added time of doing it all over again when it’s not right! You can quickly see how much of a drain it can be on you, your team, your HR department…the list goes on.
Your total bill for a bad hire is…
In conclusion: ouch.
You really can’t afford to waste time, money and resources on individuals who will not benefit your business.
It’s critical to your company’s morale, productivity and culture that you find the perfect candidate for the long run.
Let’s make sure you are hiring right for your business the first time. We can save you the hassle – contact us today for help hiring top talent for your business.
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