Written by Hannah Asbury, Senior Consulting Associate
There are few things that are universal across varying industries and companies, but one thing they all share is the need to hire new employees. While the frequency and amount may differ from one organization to the next, they each spend a large amount of money every year on the recruitment and hiring of new employees.
To minimize wasted expenditures and ultimately save on hiring costs, it is imperative that companies focus on putting the right person in the job the first time around. When an employee is a bad fit for a role, there are not only negative fiscal ramifications, but other less obvious costs as well. A bad hire can increase turnover costs, reduce productivity, and lower overall morale.
Needless to say, hiring a new employee is very costly. According to the Society for Human Resource Management (SHRM), the average cost to hire an employee is between $4,000 and $5,000, with triple that cost for executive roles. And that’s just to get someone in the door. If the employee turns out not to be the right fit, the company has lost that cost of recruitment and any potential training costs, and also has to start the process over again to refill the position. Then, realistically, companies may easily spend $8,000 to $10,000 or more to identify one hire who is a good fit for the role. On top of that, time and productivity losses occur when a bad hire turns over. This is especially noticeable if the employee was brought on to work on a project that has an approaching deadline or specific deliverable.
Three impacts of a bad hire:
- Lower productivity levels
- Higher turnover costs
- Reduced organizational morale
If cutting costs isn’t reason enough, a bad hire will also reduce productivity levels. Those who aren’t a good fit for the role will likely produce work and deliverables that are not up to par and require additional review, feedback, and development. Other employees are forced to take on the work that is not being completed – or is not being completed to your company’s standards – which puts additional strain on overall capacity and productivity.
SHRM estimates that when a bad hire turns over, the total cost including lost productivity, lost hours of training, etc., is typically about 40% of the individual’s salary. To put that into perspective, if the employee’s base salary is $50,000 annually, that’s a $20,000 loss. Furthermore, if the new hire is in a customer-facing role, that bad hire becomes visible to your customers, which can lead to confusion, uncertainty, or even a lack of trust in your brand.
Finally, a bad hire can lower organizational morale. Hires who are not a good fit with other personalities in the organization lead to tension and strain within a team. That tension ultimately affects existing employees’ attitudes toward their jobs, other co-workers, or the company itself. Similarly, when staff has to help pick up the slack from a bad hire, they are working harder and longer with no additional compensation or change in job title. At times, these employees find themselves working on projects with which they are unfamiliar and were not originally hired to do. These are prime conditions for negative impacts on job satisfaction, employee engagement, and overall morale.
Invest time in hiring from the beginning
Higher turnover costs, reduced productivity levels, and lower organizational morale are just three possible impacts of hiring a poor fit for your organization. The simplest way to avoid the cost of a bad hire is to put extra time and effort into hiring a good fit on the first try. Investing in finding the right fit results in numerous benefits for your organization and for your existing employees. There are many different tools available to help your organization invest in finding a good hire.
Some of those tools include behavioral-based interview guides, cognitive assessments, or personality-based assessments. With new modular assessment technology, you can configure an assessment that is specific to the open roles you’re hiring for, increasing efficiency and effectiveness of your hiring efforts. You can ask Motivational Fit questions in your interview, which provide additional insight into whether or not the candidate’s beliefs about work and the position are consistent with your organization’s values. Whatever you do, the extra work hiring new employees up front will pay off in the long run. You’ll reduce hiring costs, minimize turnover, and maintain positive productivity and organizational morale, all while avoiding that dreaded bad hire.