The grueling cost of a bad hire
Posted On July 5, 2017
Bad hires are time, effort, money, and cultural sinks; bad apples with the potential of tarnishing delicate office environments and absorbing assets like a blackhole. Naturally, no one goes into a hiring position with the aim to employ the ill-equipped, but the importance of patience – and more often than not, employing a protracted hiring process – is lost on many businesses, big and small, eager to fill that empty capital lot. Before signing that next employment contract, consider the costs of a bad hire, and how your business could optimize its employment process to avoid unnecessary expenses.
The most obvious reason for avoiding a bad hire is financial. Zappos CEO Tony Hsieh once estimated bad hires had cost the company “well over $100 million”. While this figure is less for SMEs, most hiring and HR managers agree that this figure is at least in the “thousands of dollars”.
Firstly, we must consider the most basic financial sink of a company: Payroll. Funding an employee is a huge cost for any business, but the promise of human ROI is there. When you put a bad hire on the payroll, you’re flushing money down the toilet with little to no return. On top of their wages, there are visa costs, training – if offered – and providing office assets like a computer or telephone. By the time you’ve actually got around to terminating them, your bad hire has already cost you at least 30 percent of the employee’s first-year earnings. Plugging your office with warm bodies isn’t always the best option. Although it might be a strain on your existing workload, sometimes it’s better to leave that spot free until the perfect person comes along.
Most management are willing to give new employees benefit of the doubt. If their new hire seems to struggle they’ll look for further onboarding processes, introduce some training, or attempt to relocate them to another role in the company – after all, it seems like a better idea than starting the entire hiring process again from scratch. If they’re still not getting it, haven’t managed to fit into your current company culture, and are not living up to their promises of productivity, it’s kinder on your management team to remove him from the workforce, lest they spend even more resources on a lost cause.
A bad apple can sometimes spoil the bunch and can do in a myriad of different ways. It’s paramount that before introducing a new dynamic to the team you understand how it will negatively or positively impact its current members – if there’s any hope of preserving an existing culture. One loose cannon – a disrespectful manager, an egotistical team member, a sloth – has the potential to displace key employees. So, if you feel the need to adopt a “warm body” to fill an empty slot, choose wisely with due consideration given to those that have already made the grade at your company.
Remember that your star players don’t want to be saddled with Cs. The worst-case scenario is that these A-listers bail instead of carrying the deadweight of an unproductive colleague. Instead of one vacant space, you’ll be teeming with new openings that were once filled by positive employees.
What can you do to minimize the risk of a bad hire?
It’s a virtue for a reason. Openings do not need – most of the time – to be filled immediately. Diversify work within your own labour if you need to score more time before the seat needs to be filled. Hopefully, some internal delay strategies will give your hiring team time to find someone suited for your company.
Human Resource Management Systems are great tools for evaluating the productivity and overall flow of your employees, and more importantly, give your HR personnel rapid management over their administrative duties. With less paperwork and analytics in their day-to-day, they’ll have more time available to screen potential employees and search for better hires.
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