The Mounting Cost of a Bad Hire in a High-Pressure Job Market

The Mounting Cost of a Bad Hire in a High-Pressure Job Market

Emily Smykal

calculating the cost of a bad hireWhat if a bad decision cost you $25,000? Or even $50,000? If the decision was a new car that broke down, or a down payment on a home that turned out to be uninhabitable, you’d want your money back. But what if that cost came from the decision to hire the wrong person? For employers, the cost of a bad hire can vary widely, from low morale and legal issues, to reduced productivity and a negative bottom line.

Why do employers face these costs in the first place? In today’s labor market, the pressure to find quality hires is growing, and the time it takes to fill a position is rising. Often, hiring managers must decide between a candidate their recruiters have already identified, or hold out for a better hire and keep the relevant position open.

If the business in question is working with fewer resources thanks to an unfilled position, HR leaders know that the overall innovation and competitiveness of their company could suffer. So the pressure to hire someone new often outweighs the cost of hiring the wrong candidate, especially when those costs are not immediately apparent. In this post we’ll look more closely at the costs of a bad hire, and some ways to prevent them.

The Cost and Impact of a Bad Hire

In a study of hiring managers, CareerBuilder found that those five-figure costs of a bad hire are not unheard of, and globally the figures can be even higher. So what exactly is a bad hire, and why do they cost so much?

Simply put, a bad hire is a candidate who turned out to be the wrong person for the job, and who ultimately should be replaced. Some of the issues that indicate a bad hire include low and uninspired quality of work, inability to work well with others and follow directions, poor attitude and attendance, failure to meet deadlines, and outright complaints from customers.

Every one of these habits can negatively impact the workplace, and the company’s bottom line. When you add up the losses in productivity and sales, the low morale that can spread to other employees, and the time and cost required to locate, hire, and train a replacement, the $25,000 price tag of a bad hire starts to make sense.

And hiring managers are well aware of these costs. According to the CareerBuilder survey, 57% said a bad hire is much more costly than an open position, and only 23% said they were equally costly. HR leaders may be under increasing pressure to fill open positions, but they know the risks of a hurried and incomplete hiring process.

costs of making a bad hire

 Source: CareerBuilder’s Candidate Behavior Study

The Difficulty With Finding Quality Candidates

Why do hiring managers end up with bad hires at all, if they know the price the company might pay for these candidates? The issue boils down to the difficult task of finding the best candidates in an increasingly competitive job market.

The CareerBuilder survey also asked hiring managers to explain why finding quality hires is so difficult today. And 70% said it’s simply harder to find qualified candidates now, while 30% blamed the large number of candidates who apply. A lack of qualified people in a sea of applicants would understandably make many recruiters feel exasperated, and the cost of a bad hire might not loom so large as the pressure to fill an open position.

why it's hard to find good candidates

 Source: CareerBuilder’s Candidate Behavior Study

More data from the CareerBuilder survey backs this up. Among respondents, 43% reported they made a bad hire because they needed to fill the job quickly. A further 22% blamed “insufficient talent intelligence.” But a quarter of employers surveyed said they didn’t know why they made a bad hire. Mistakes happen, but in the age of big data, it’s possible to minimize the impact of them.

Shifting Recruiting Resources Upstream

If more than two-thirds of hiring managers see a lack of qualified candidates as the main obstacle to hiring quality employees, then attracting the right people should be their top priority. This requires a proactive approach to recruitment and employer brand, with a focus on relevant metrics and platforms, and forecasting upcoming needs.

As we’ve already learned this year, senior management view their HR counterparts as reactive, not proactive more often than not. So focusing on the strategic, data-driven elements of a recruitment process can achieve two goals here: shifting the HR team’s role from reactive toward proactive, and attracting qualified candidates in a mature, thoughtful way.

Good social recruiting skills and strong employer branding across all channels, coupled with a robust candidate experience that utilizes modern technology, can help diminish the challenge of filling open positions, and reduce the numbers of bad hires. Add to that useful analytics that allow hiring managers to make continuous improvements to their recruitment methods, and recruiters will find themselves selecting better candidates, from stronger candidate pools–not having to account for the costs of a bad hire.

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