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The Cost of a Bad Hire

Hiring can be one of the most important decisions a manager makes. While most would agree with this statement, many managers have a story (or two) to share about one of their bad hiring decisions. In fact, according to a 2017 CareerBuilder Survey, 74% of employers say they have hired the wrong person for a position.

There are many tools available to calculate the cost of a bad hire. While not exact, the U.S. Department of Labor’s estimate is simple – the average cost of a bad hiring decision is at least 30 percent of the individual’s first-year expected earnings. If you take an employee with an annual income of $50,000, the cost to the organization can be $15,000. Others argue the cost is actually greater. Why the debate? Because some expenses are easy to quantify, and others are not. 

So, knowing the downside, why do we continue to see bad hiring decisions? The same CareerBuilder survey provided some insight: 35 percent knew the candidate didn’t have all the needed skills but felt they could learn quickly; 32 percent took a chance on a nice person; 30 percent felt pressured to fill the role quickly; and, 29 percent focused on skills and not attitude. 

What can you do to improve your odds? 

While there is no magic bullet, there are techniques managers can use to reduce the likelihood of hiring the wrong employee.

1. Implement a Rigorous Selection Process

Hiring processes are structured in many different ways. The number of steps in the process, and the types of assessments used to evaluate candidates, vary depending on the type and level of position. However, ensuring rigor and consistency in the process is critical to making better hiring decisions. Instincts can be powerful, but they aren’t always right. A few common assessment types include:

2. Don’t Sacrifice Quality for Speed 

While supporting hiring activities, it is common to hear statements like ‘I need someone quickly, just get me anyone who knows Excel’. Too often, hiring managers are so anxious to put a body in a chair that they overlook a candidate’s flaws and hire someone who doesn't really meet the needs of the job. The reality is, leaving a position vacant is better than bringing someone in who cannot perform the role. Poor performers require more energy and effort from the manager and peers – a manager may put their own productivity and performance, or that of their team, at risk to keep a poor performer afloat. Slow down to find the right person. It will be better in the end. 

3. "Try Before You Buy"

Using a temp-to-hire approach may be beneficial for some roles. It provides the opportunity to hire someone on a temporary assignment to evaluate if the candidate is able to meet the needs of the job prior to making a longer-term commitment. This approach can work well for entry-level roles when candidates have little, or no, relevant work experience. It can also be a great option for administrative positions where organization, time management, and resourcefulness skills are imperative. Evaluating a candidate in a real-world scenario is always be more reliable than interviews and assessments alone. The HR Talent Acquisition team has a Temporary Staffing Service to assist managers in sourcing and screening applicants to fill temporary needs. The in-house service offers rates that are a fraction of those of third party vendors and much less than the cost of a bad hire. Unlike third party staffing agencies, Talent Acquisition does not charge a conversion fee for transitioning temporary employees into regular staff roles. Contact your Talent Acquisition Partner to learn more.  

Most managers will make a bad hiring decision at some point in their career. There is no formula to ensure that every hire is a great one. However, if you invest the time and effort to conduct a rigorous and consistent hiring process, the chances of making a great hire improve drastically.