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Can you calculate the cost of a bad hire?

Regardless of how effective your recruitment process may be, there will be times when a new employee simple cannot effectively or successfully perform the job they were hired for.  Further, there are times that an applicant is simply successful at getting through the process without the necessary skills and expertise to perform the role well.  The result?  A bad hire.

The purpose of this article is to help you consider ways your business is negatively impacted beyond your current thinking so that when you experience a bad hire you master the process of addressing the issue immediately versus procrastinating or hoping things will magically improve.

Certainly, the time you spent training the new employee is a cost.  I would also like you to consider the following areas of impact to your business that should be recognized when determining next steps with a bad hire.

  1. The cost of recruitment including the job posting, job advertisements, updates to the website, social media posts, etc.
  2. The cost of your time and that of all employees involved in the recruitment process such as members of the interview panel, resume screeners, interviewers, those involved in scheduling and coordinating the interviews, and the time of everyone involved in making the hiring decision, preparing offers, conducting pre-employment screening, referrals, etc.
  3. The cost of lost productivity due to the bad hire’s inability to perform the duties of the position.
  4. The cost of low or poor morale by the other employees doing their work. This cost is related to the possible employee relations issues, complaints, and grievances that can materialize when management fails to properly and adequately staff the workforce.

It is for these reasons listed that you are encouraged to established performance management programs that set expectations and goals from date of hire, and demand supervisors to appropriately and timely execute their roles to evaluate and manage the performance of their staff.  The earlier you can identify a mismatch, the sooner you can take appropriate steps to remedy the situation.  Do not move the problem employee around your workforce, that will make things worse over time.  Instead, identify the problem, recognize the costs for failing to act, and take appropriate action.  While it would be nice if there was a fool proof way to only make good hires, you can mitigate the rare bad hire by timely and effective separation and replacement with another good hire, recognizing the various costs to your business success by allowing the bad hire to remain in the workforce.  Happy hiring!