How Much Could A Bad Hire Cost Your Company

On this blog, we have discussed many times the challenges of making the right hire and finding the right candidate and how to avoid a bad hire. And although every recruiter or hiring manager is disappointed when a hire that seemed like a good fit, in the end, doesn´t work out, there is much more to a bad hire than just starting the recruitment process again. Have you actually ever quantified how much a bad hire could cost your company?

 

Of course, there are the obvious costs of having to get rid of that person again, whether it´s a voluntary leave or a lay-off. If you´re lucky the person is still in their probation period and these costs are minimal, but usually, there are some costs involved in getting your bad hire to leave the company again. And then you have to start your recruitment process from scratch again to find a new candidate, where usually a lot of time and resources are involved. Definitely, not a cost-efficient procedure.

 

But what about the more indirect costs you may not have thought about when considering how much a bad hire is costing your business?

  • Training costs

You probably have dedicated time and resources training and onboarding the new employee. This is basically a sunk cost because you won´t be able to recuperate it. And, once you manage to get rid of the bad hire, you will have to spend that same time and resources training the replacement for your bad hire. Dependent on the position, training can be quite time-consuming and costly so this cost can be quite significant.

  • Impact on other employees

Ever heard the saying “a bad apple spoils the bunch”? Bad performance or inefficiency is contagious so bad hires can have a very negative impact on your other employees. Also, when a bad hire doesn´t perform the way they should be, your other employees likely will have to make up for it, causing them to get burned out or demotivated because of the extra work they have to do. Also, poor performers tend to lower the bar for everyone and bad habits spread easily through the company. Hence, be aware of the impact on your other employees.

  • Lost business before bad hire is identified

Usually, it takes some time to identify a bad hire and during that time they have wasted their time and your money working on the wrong things.

  • Strained client relations

If your new employee is working in direct contact with clients, there might be some hidden costs of this bad hire in strained client relationships. This part is hard to quantify but it can have some long-term negative effects on your business and the income you could have generated from those clients.

  • Potential legal issues

Assuming you did not find out this was such a bad hire during the trial period, you might be facing some legal issues if you want to get rid of the employee after the trial period. Hence, making sure you´re not having any legal issues by getting legal counselling or getting sued by the employee you want out, is definitely a cost you need to take into account.

In summary, a bad hire can cost your company so much more than just the selection and recruitment costs of a replacement. There are quite some hidden costs that can be very significant and also negative effects long term in terms of strained client or employee relationships that are hard to quantify but that definitely are a cost for your business.

 

What do you think a bad hire could truly cost your company?

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