Common Hiring Mistakes: Cost of a Bad Hire and How to Avoid One
A strong recruiting program can be critical as a company grows, which is why learning the cost of a bad hire and how to avoid common hiring mistakes can help you build a robust and productive team. Alternatively, a bad hire can lead to lost productivity, a negative impact on client relationships and sales, and other potential negative outcomes. So, what are some challenges employers frequently face when attracting top candidates? And how can you learn from bad hiring decisions so that you can successfully recruit and retain a top-performing workforce?
What is a bad hire?
A bad hire can be an employee who demonstrates behavior that negatively impacts morale, productivity, and key relationships to the business. A bad hire may bring conflict into the workplace, derail co-workers' motivation and productivity, and create a genuine risk to the growth of your business. How do you know if you have a bad hire on your team? In general, bad hires may display some or all of the following behaviors or traits:
- They don't possess the required skills to perform the required job duties: This could indicate that the employee embellished their past experience or skills in the job application or in the interview during the hiring process. But It may also mean that training and feedback have been deficient. This also could indicate a deficiency in the hiring process. For example, not asking the proper questions in the interview to determine if the candidate was qualified.
- They have a bad attitude: A person who is hostile, judgmental of others, or appears irritated or bothered by colleagues may be a bad hire. With this attitude often comes an inability to take responsibility when things don't go as planned.
- They're not reliable: Whether they consistently miss deadlines, show up late, or have sloppy work, these employees can be a drain on the rest of your team and make the company look bad to customers, clients, or others in your industry.
- They repeat the same mistakes: Mistakes at work are bound to happen, and these experiences allow employees to learn and grow from missteps. But repeatedly making the same mistakes without understanding how to avoid them going forward could signal a bad hire. It can also be frustrating for other employees.
- They're unwilling to adapt to new situations: Bad hires tend to reject or criticize any suggested changes in the business or suggestions for improvements. Their reaction to new projects or work tasks may be, "That's not my job."
- They aren't producing results: Every employee should have goals that move them toward improved job performance. Clients, customers, and other employees all expect results, but if the employee can't deliver, this could be a red flag.
Potential Costs of a bad hire
Filling a position with someone who ends up being a bad hire can cause a ripple effect throughout your business in many ways, both financially and otherwise. Consider the potential effects of a bad hire:
- Monetary costs that cover the hiring and onboarding process, as well as costs that include the employee's salary, benefits, etc. If the bad hire leaves, you need to spend time and resources in hiring a replacement.
- The impact on the rest of your staff, including motivation levels, morale, the time and resources required to fix or redo a bad hire's work, and the extra work supervisors need to put into their workday.
- Potential to damage your business's reputation, particularly if bad hires have direct contact with customers. These are precious relationships that poor-performing employees can undermine, perhaps permanently. If you wind up firing a employee that was not a good fit for your company, they may leave disgruntled and share their negative opinion of your company with others. This could have a lasting impression on future candidates and new hires and may ultimately damage your brand.
How do you calculate the cost of a bad hire?
Measuring hiring costs will look different for every organization. But understanding the costs of ineffective recruitment and candidate selection can shed light on how serious the potential ramifications are for the business. Use the formulas below to help you determine the effectiveness of various aspects of your hiring efforts.
Cost of hiring activities
One key formula is the cost of your staff conducting hiring-related tasks. Calculate this number with the following formula:
# of hours spent on hiring-related tasks per week x employee's hourly rate ($)
For example, three employees handle hiring activities for your business 15 hours per week, each with an hourly rate of $35 per hour. That's $1,575 per week in your hiring activities cost (15 hours x $35 hourly rate x 3 employees).
This formula underscores how important it is to have an efficient hiring process. Dragging it out can cost your business in the long run.
Revenue per employee and profit margin per hire
Profit margin per hire illuminates not only bad hires but identifies how well star performers contribute to your bottom line. When employees you bring on board do their job exceptionally, this is likely an excellent return on investment for things such as onboarding and other aspects of the new-hire process. What does that equate to in dollars? First figure out your revenue per employee — the business's total revenue divided by the current number of employees, to estimate how much money each employee generates for the business. You want the highest ratio of revenue per employee possible because it suggests that you've invested in a productive workforce.
Cost of recruitment marketing
If you market open positions on job boards or websites, calculate the cost of this investment by: cost per recruiting ad x # of open positions
For example, if you have 10 open positions and an ad is $300 each per month, your recruitment marketing cost would be $3,000 for that month.
5 best practices to avoid common hiring mistakes
The most cost-effective way to handle bad hires or difficult employees is to avoid hiring them in the first place. Hasty, ill-informed hiring decisions can often turn out badly. A thorough, professional recruiting and hiring process for new employees is a better approach. Consider these common hiring mistakes and how to avoid them.
Develop a strong applicant tracking strategy
Finding the best candidates requires a clear tracking strategy. Consider employing sources such as job boards and social media to raise your employer profile. As a result, candidates are more likely to see new jobs as they become available and apply to them. An increased employer profile can also allow potential candidates a glimpse into your company brand and culture.
For specialized roles, consider whether you need to move beyond your standard process. For example, if you're recruiting technical talent, consider developing a more focused candidate pool by looking at sources such as:
- Specific job boards
- College programs
- Professional associations
Develop high-level and job-specific sourcing strategies, which leverage multiple techniques for better recruiting outcomes.
Consider developing internal candidates
Certain roles may require skill sets or experience that isn't currently available in the organization — and in some cases, outside relationships and experience can be a major asset to your company. However, it can be common for recruiters to overlook internal candidates; recruiting, hiring, and promoting from within may offer many benefits. Do you have a promising worker inside your company interested in taking the next step in their career or moving to a different department? Recruiting from within may help you retain talented workers who are looking for a change and build on existing institutional knowledge. Consider communicating job opportunities to potential internal candidates via an employee newsletter or through company meetings. Employers should be mindful of their obligations to notify employees of promotions under state and local laws.
Don’t wait for the "unicorn" candidate
Job descriptions can sometimes consist of a list of attributes for an ideal candidate — a "unicorn" — who simply doesn't exist. As a result, finding and attracting a person who checks every box can be nearly impossible, plus you'll draw out the hiring process in doing so. Your goal should be to define what a job really is and be clear about the skills and experience it takes to thrive there. Use that as a barometer for evaluating which candidates are a good fit on multiple dimensions, rather than conducting an endless search for perfection.
Conduct pre-employment background checks
It can be tempting to skip a pre-employment background check when you've found what looks like the perfect candidate for a role you need to urgently fill. However, a post-offer, pre-employment background check where permitted by law can help you to verify information you're relying on, such as previous experience, education, and certifications.
Additionally, a criminal background check (depending on the role, where and as permitted by law can give your company the ease of mind knowing that valuable company resources — from client relationships to finances — will be in good hands.
Manage the rejection process
Throughout the recruiting process, you'll likely meet individuals who might be strong candidates but ultimately choose someone else. As you inform these individuals, it's important to think about how you're managing your rejection process. After all, the way in which you turn down a candidate can say as much about your recruiting process as all the other steps do.
Clear, timely, and professional communication can speak volumes about your company. Long delays, lack of follow-up, and negative rejection experiences, on the other hand, can have negative consequences for your brand. Not only will a poorly rejected candidate be unlikely to apply again in the future, but they could tell others about their experience with your company. In instances when you're communicating with finalist candidates who may have gone through multiple rounds of interviews, consider speaking to them personally.
Feel more confident about your new hires
Hiring top talent can have a direct correlation to company growth and profits. Developing a strong recruiting strategy to improve your hiring process can help prevent you from making mistakes and make sure you are bringing in the best individual for the job. If you need guidance developing effective recruiting strategies, consider taking advantage of hiring solutions available on the market today.