How much does a bad hire REALLY cost you?

How much does a bad hire REALLY cost you?

You can boil down the responsibilities of a manager into three key areas – find great employees, develop them, and keep hold of them.

So, it’s quite clear that if you don’t get the first one right, it makes the other two pretty difficult!

When you think about it in these terms, you can see that it is really worthwhile spending time hiring the right employees. The costs of getting it wrong are high and not only in financial terms. According to a recent report by the Recruitment and Employee Confederation, UK businesses fail to find the right fit for two out of five jobs.

Here are just some of the areas that are impacted when a bad apple finds its way into the mix:

Team morale plummets

A bad hire can cause a disproportionate amount of negative feeling from the rest of the team. Maybe they have a bad attitude, don’t pull their weight, or are unable to build relationships. Their other team members have to pick up the slack, or cover up errors, and end up feeling resentful and disillusioned. At best, it diminishes the effectiveness of the team. At worst, you can find your great employees becoming so embittered that they leave themselves.


Customers can become impacted

If the bad hire is customer facing, this can be critical for your organisation. Perhaps you have someone who is lazy and constantly trying to cut corners. Or they have no empathy with customers. The type of person who never does what they promise to do. When it impacts on your customer service, you can find your clients walk away. Once you lose customer loyalty – and one poor interaction can cause that – it’s extremely hard, and expensive, to win it back.


Resources get diverted

You remember the old 80/20 rule? Well, it will apply to your bad hire. If you have a team of five people, we can guarantee you will spend 80% of your time dealing with issues arising from the one poor member. Instead of developing other employees, you’ll get sucked into a cycle of dealing with negativity. You’ll spend your time listening to complaints, trying to encourage that one person to meet minimum requirements, constantly overseeing them, going through disciplinary procedures or dealing with the fall-out from unhappy suppliers or customers. In fact, it’s a sure-fire way to identify that you have the wrong person when you feel you do nothing but micromanage one individual.


The bottom line impact

There is, of course, a huge financial impact of a bad hire. Firstly, you have paid out recruitment costs, and are now paying a salary to someone who is not giving you any value in return. Perhaps you paid for a relocation package. You may also be incurring costs such as additional training. And if you end up having to let the employee go, you may have to come to a severance agreement. Not to mention the cost to hire a replacement.

The REC report uses statistics to look at the financial impact on business across the UK. They estimate that the number of bad hires made in Q1 2017 was 745,880. If you multiply that by the average weekly earnings for full-time employees (£539 per week), that’s a total cost of £402,029,320 per week. If each bad hire made in Q1 2017 remained at a business for only one month (4.2 weeks), the total cost in wasted salaries would be £1.68 billion.


Your reputation can suffer

Don’t underestimate the damage that bad hires can cause to your brand and your reputation. We live in a transparent world where job seekers have access to information around the clock. They will soon hear about issues in your workplace. We know of a gentleman who had just accepted an exciting new job, and who received a phone call from the person who had been sacked from the same job. She systematically tore his new employer to shreds.


And with review sites rife on the internet, customers who feel badly treated will have no compunction about venting their disappointment online, for all to see, and forever published. Monitor your online reputation closely to see what others have said about your work environment, and be honest about what your company needs to work on during the interview process.