The Real Cost of a Bad Hire

AVOID THE RIPPLE EFFECT

Nearly ¾ of businesses report being negatively affected by bad hires each year, and the effects go beyond wasted onboarding expenses. One bad hire can wreak havoc on your business’s productivity, reputation, morale, and ultimately, bottom line. Minimize your risk of making a bad hire by taking advantage of comprehensive pre-employment screenings from 3rd Degree Screening today!

ONE BAD HIRE CAN COST YOU THOUSANDS

When considering the consequences of making a bad hire, many people think about the wasted up-front costs of training the candidate. However, a person’s impact on your workplace can persist long after they’ve been let go, and when all is said and done, the ripple effect from one bad hire may end up costing you thousands or even tens of thousands of dollars.

WHAT MAKES A BAD HIRE BAD?

Generally speaking, bad hires fall into at least one of three categories:

• Poor effectiveness in their role: They cannot produce the needed quality (or quantity) of work, or they lack the skills or credentials they claimed to have during the interview process.
• Poor interpersonal relationships: They cannot get along with their coworkers or have a consistently negative attitude.
• Poor attendance or commitment: They consistently show up for work late or not at all.

When a bad hire demonstrates one or more of these qualities, your team (and your business’s pocketbook) suffer because of it. Let’s take a closer look at all the ways that one bad hiring decision can damage your business:

1. WASTED ONBOARDING EXPENSES

According to a study by the Society for Human Resource Management (SHRM), the average cost to onboard a new hire is around $4,129, and the average amount of time it takes to fill a given position is around 42 days. That’s a lot of time and money being invested in finding and hiring the right fit!

But what if the fit isn’t right? You risk spending thousands in recruitment, training, supplies, and equipment expenses, only to find out that the candidate can’t perform the job. After they’ve been let go, the process starts all over again, and you can only hope that the next hire will be worth the time, effort, and money!

Fortunately, 3rd Degree Screening’s comprehensive pre-employment background checks can take some of the guesswork out of hiring. We’ll check your candidate’s information against a wide range of databases and other resources to confirm that their credentials are legit, and our applicant tracking system (ATS) makes it easy for you to streamline your hiring process. Find the best candidate for the job and don’t worry about wasted onboarding expenses ever again — minimize your risk with pre-employment screenings!

2. HIGHER TURNOVER

If your good employees have to deal with ineffective or negative coworkers, they are much more likely to leave your business for a different opportunity. According to analysis from the Harvard Business Review, up to 80% of employee turnover can be linked in part to problems with coworkers.

Your good hires are directly impacted by your bad hires, and poor performers can cause higher turnover of your best employees. Invest in your team and minimize your turnover rate by making a concentrated effort to carefully screen job candidates.

3. LOWER MORALE

When one employee never shows up or can’t pull their weight at work, the rest of your team can get burned out trying to make up for it. Your best employees are reliable, hard-working, effective, and willing to go above and beyond to get the job done well — that’s what makes them the best. When a poor performer is thrown into the mix, your good employees have to pick up the slack for the sake of the team. This can damage morale throughout the office.

Also, some bad hires are bad because of a poor attitude. Even if a candidate seems effective in their role, if they can’t get along with their team or are consistently negative, then workplace morale will take a hit.

In fact, according to a survey by Robert Half that was cited in Entrepreneur Magazine, executives report that bad hires negatively impact workplace morale up to 95% of the time! Protect your company culture by keeping bad eggs out of the basket. 

4. LESS EFFECTIVE TEAMWORK

Workplace collaboration is crucial to driving innovation and increasing efficiency. Cooperation among coworkers can result in faster problem solving, more effective learning and development, and higher workplace trust and morale.

It makes sense, then, that when people can’t work effectively alongside their teammates, every employee suffers. 60% of surveyed employers report that bad hires cannot work effectively with the rest of the team. Whether that’s because they’re a bad fit for the company culture, a poor team player, or simply ineffective in their collaborative efforts, a bad hire can get in the way of effective teamwork and innovation.

5. DECREASED PRODUCTIVITY

What happens when morale plummets and teamwork crumbles? Workplace productivity slumps as well.

Not only that, but bad hires also lower the bar for everyone, and poor habits can spread through a business like wildfire. When your hard-working employees see that their peers are underperforming without consequences, they may think: why should they have to pick up that slack? Even if your best employees work above and beyond the standard to meet the business’s needs, it’s counterproductive and exploitative to allow a bad hire to continue in their role while your other employees burn out.

In a study by Global HR Research, 39% of companies reported significant decreases in productivity that could be directly linked to bad hires. Cut your losses by getting rid of bad hires fast, and avoid making poor hiring decisions in the first place by doing your due diligence before extending a job offer.

6. DAMAGED REPUTATION

Whether your company offers a product or a service, if a bad hire performs poorly in a client-facing role, then your reputation is likely to take a hit. In the digital age, online reviews can make or break a business; in a study by Podium, 93% of people said that online reviews directly impacted their buying decisions. Even one poor customer experience can have a ripple effect on your opportunities for future business, and an unsatisfied customer is far less likely to offer repeat business or referrals.

Protect your business’s reputation with customers by choosing a team that you’re proud to have represent you. Make sure they’re the right person for the job with pre-employment background checks!

7. FEWER GOOD CANDIDATES

The irony of a bad hire is that their performance can make it harder to replace them with better candidates. If job seekers hear that your company has high turnover, low morale, poor teamwork, and a bad reputation among customers, they are far less likely to submit an application or accept an offer. In fact, Corporate Responsibility Magazine reports that 69% of job seekers are likely to reject an offer from a company with a bad reputation.

Prospective employees are looking for an attractive workplace, and the effects that one bad hire can cause may sully your company’s image to top talent.

So what is the actual, quantifiable cost of a bad hire? It’s hard to put a price tag on the potential damage to your workplace’s reputation, productivity, and morale, but several organizations have tried.

A CareerBuilder survey found that:

• 41% of companies estimated that a single bad hire costs more than $25,000
• 25% of companies put the price tag for one bad hire at more than $50,000
• Replacing bad hires in entry or mid-level positions may only cost $7,000 – $10,000
• Replacing bad hires in managerial positions typically costs in excess of $40,000

Meanwhile, the U.S. Department of Labor estimates:

• The average bad hire costs a business around 30% of that person’s annual earnings

For example, if you hired someone for a $60,000 salary and they turned out to be a bad hire, that individual would actually cost your company closer to $78,000, 30% more. If the role is supervisory or technical, that percentage jumps to upwards of 50%.

Hard numbers are hard to pin down, but as a general rule:

• The higher the position (and salary) of the hire within the organization, the higher the cost of the bad hire
• The longer the poor performer has worked at the organization, the higher the cost of the bad hire
• The more training that is wasted on the individual, the higher the cost of the bad hire

In the simplest terms, it is always more expensive to replace a bad hire than to hire the right person in the first place, even if that means increasing your up-front onboarding costs with more comprehensive pre-employment screenings and more selective hiring.

1. KNOW WHAT YOU’RE LOOKING FOR

First, make sure you have clarity on the role that you’re trying to fill and the type of person who would succeed in it. Ensure that the job description on your posting is accurate and thorough to attract the most qualified candidates.

Evaluate the top skills, responsibilities, and experience needed for the job, and collaborate with existing employees who are familiar with the position to isolate the most important qualifications. Spending a little extra time to craft a realistic, effective posting will help you attract the best candidates and save you time on reviewing unqualified applicants.

2. DON’T RUSH IT

If your team is short-staffed, needs extra manpower on a large project, or is trying to fill a position that requires unique expertise, there may be a lot of pressure to make a quick hire. Resist this temptation! When there’s pressure to fill a role fast, hiring managers are more likely to ignore red flags and make poor decisions.

In a 2012 CareerBuilder survey, 43% of respondents admitted to making bad hires because they needed to fill a role fast. Even if it takes weeks or months to find the “perfect fit,” it’s worth it to avoid all the associated costs of a bad hire.

3. SCREEN FOR QUALIFICATIONS AND CULTURE FIT

When considering applicants, thoroughly vet them for more than simply their qualifications and accomplishments. Personality and culture fit is just as important. Find out everything you can about their experience. Call references. Consider utilizing personality assessments as a part of your interview process. Accept one-way video interviews (in which the applicant provides answers to a list of questions over video). In general, make sure you’re considering candidates comprehensively.

4. USE BACKGROUND CHECKS

One of the single best things you can do to improve the quality of your hires is to invest in pre-employment background checks. Thorough screenings often find discrepancies in what a candidate claims in their application or interview. Sometimes the discrepancies are simple and relatively harmless, like a minor date disparity. Other times, background checks can uncover more serious issues like blatant lies about credentials or even criminal histories.

It pays to do your due diligence and dig up any red flags before a bad hire causes big problems later on.

GET COMPREHENSIVE EMPLOYMENT CHECKS WITH 3RD DEGREE SCREENING

At 3rd Degree Screening, we want to help you build the best possible team for your business. We offer industry-leading employment screenings to help you get the full picture on each of your candidates. From background checks on employment history and education verifications to sex offender record searches and pre-employment drug screenings, our services can give you the tools you need to build the dream team.

In addition to our background check services, our Applicant Tracking System (ATS) is a recruiting and applicant management platform that can help you find qualified candidates faster and easier than ever before. You can customize the platform to your unique hiring needs and streamline it to screen for the best candidates for your business.