What’s the Real Cost of Hiring the Wrong Person?

Some warning signs that a job candidate may not turn out as expected could go unnoticed. The result may cause significant harm to your organization; the cost of staffing a bad hire can be much greater than a waste of your recruiting expenses. It can also be more disruptive than a potentially unpleasant employee termination. According to statistics reported by the U.S. Department of Labor, the financial setback alone could cost your organization an average of about 30% of a new employee's first-year earnings if a poor hiring process and decision was made.

Bad hires generally do not turn out to be individuals who exaggerate their skills on a resume or act out false enthusiasm during an interview. As a hiring manager, you may have initially registered a positive impression of a job candidate, but then later discovered that the individual is difficult to train or doesn’t fit in with your company's culture. Your organization will be best served by taking steps to avoid the cost of a bad hire; for a recruiter, onboarding an individual who’s a poor fit for your team could result in more than “just” a financial loss.

A Bad Hire Can Hurt an Organization and Its Team Members

Alpine ski racer and Olympic gold medalist Aksel Lund Svindal summed up the value of a healthy team dynamic when he said: "There is almost no skill or ability you can have that is so good it allows you to ruin the social qualities of the team." Regardless of an individual’s skill level, an inability to fit in with an organization’s culture and work environment can destabilize an otherwise cohesive and productive team.

Your company's budget is not all that’s affected by hiring and training the wrong candidate. A poor hire who lacks the ability to work synergistically and cooperatively with an experienced team can lower your existing employees' productivity and morale.

Nearly 74% of employers were forced to deal with the negative consequences of a bad hire, as revealed by a survey conducted by Harris Poll. Among the respondents, 37% claimed a bad hire resulted in reduced productivity and 32% of the employers noted they lost time recruiting and training a replacement. Close to a third of the employers surveyed stated that the quality of the company’s work was compromised when a poor-fit new hire joined the team.

A Bad Hire Can Affect Your Bottom Line

Many small businesses cannot afford to repeatedly recruit, hire and train new employees. The cost of hiring the wrong person can also be reflected in a company's bottom line as a result of:

• Decreased production quality: Employees are forced to perform harder to pick up the slack and meet quotas, which can lead to mistakes or low-quality results.
• Reduced employee morale: Team members who would otherwise remain highly motivated may begin to feel burned out or start cutting corners when forced to work with a “bad apple.”
• Diminished customer satisfaction: Clients and customers can react to lower-quality products or services and begin looking elsewhere for substitutes.

Some Early Warning Signs of a Bad Hire May Be Detectable

Although they are common, bad hires are also preventable. It shouldn’t always be assumed that a candidate who appears to have the skills and qualifications to perform the job will turn out to be a good hire. The cost of effective recruiting and onboarding can, however, be far less than the cost of a bad hire.

An employee's organizational habits may not be easily revealed during the recruiting and interviewing stages. While a well-groomed and self-confident candidate can appear polished and poised, an individual’s poor work habits and attitude issues may not be discovered until he or she has made it past the onboarding stage. It may not take long after that point for some or all of your best team members to be “turned-off” to the new recruit.

A seasoned and perceptive interviewer can detect some behavioral warning signs while screening a candidate. An interview may provide clues that indicate there's a chance of a candidate turning out to be a bad hire. Body language and other tell-tale actions that are red flags can include:

• Bringing a phone or distracting mobile device to the interview
• Feigning interest in the company or position
• Smelling of cigarette smoke or alcohol
• Asking questions unrelated to the tasks or responsibilities
• Coming across as casual or nonchalant
• Interrupting or sharing too many personal details

A Bad Hiring Decision May Begin To Show During or Soon After the Initial Training Period

If a candidate prepares and rehearses for an interview, he or she may stand a good chance of getting through the recruiting process with high marks. This could lead to the individual being hired. During the initial training phase, however, some habits and behaviors may show that the new employee may not last long.

Some personality traits and behaviors that indicate new hires may not remain long after their training could include:

• Signs that the new hire is more interested in a promotion or a new position rather than demonstrating an ability to do the job he or she was hired to perform

• Noticeable displays of a poor attitude, such as complaining, offering unsolicited criticisms or comparing the new company or job to a former position

• Attendance issues, including tardiness or repeated requests for days off

• A constant need for assistance that exceeds an expected and reasonable learning curve

• Indications that the new hire may not be listening or paying attention

• A lack of the skills listed on the new hire’s resume

If you're having a hard time determining whether a new hire is right for the job, ask his or her other team members what they think. The feedback they provide could shed light on how a new hire’s attitude or skills can either enhance or diminish the team's productivity.

You May Need To Deal With a Bad Hire

Before a new hire’s behavior affects the rest of the team, you may need to have a private discussion with the individual and discuss a plan to work things out. If an issue continues, however, you may need to proceed with caution; demoting or terminating a new employee could lead to possible allegations of retaliation.

An aggrieved new hire may take action against a company by filing a wrongful termination lawsuit. He or she may allege employment discrimination or claim that your company is in breach of an implied contract. The legal expenses associated with defending against a disgruntled employee’s allegations, even when completely unfounded, are another factor that may be included in the average cost of a bad hire.

The following may help reduce the risks of a bad hire filing a lawsuit and can also be included in an employee handbook:

• Provide expectations and timelines regarding a new hire’s training milestones.

• Set up procedures for time management and when a new hire can request time off.

• Adhere to professional practices, ethical guidelines and standards of conduct.

• Establish and communicate rules regarding interactions between coworkers, managers and clients.

• Very clearly outline all of the details regarding performance reviews, raises, promotions, disciplinary actions and terminations.

A new hire’s signed acknowledgment of company policies and procedures — all of which can be included in an employee handbook — may allow your organization to legally defend itself in court. A signed acknowledgment demonstrates that an employee understood the company’s rules, policies and job requirements. If those policies and procedures are not followed, a signature demonstrates an understanding that it could result in disciplinary action or termination.

Future Bad Hires Can Be Avoided

It is important to not only hire a candidate who has the skills and talents to carry out the job requirements successfully but who is also a good match for the company culture. You may wish to consider bringing on a temporary employee so that your team may experience working with the individual during a trial period without the obligation of making a permanent hire. If things go well, you may feel more assured that a job offer will result in a good hire and a productive team member.

These are some other ways you can reduce the risks of hiring the wrong person:

• Improve the screening process with pre-employment personality testing

• Obtain consent to perform a credit and background check.

• Add social media as a recruiting tool and review a candidate’s likes, lifestyle and personality.

• Promote internal candidates who have the potential to grow and who show a positive attitude.

• Establish an employee referral system to reward new-hire recommendations that make it past the training period or an established time frame.

You Can Lower the Risks and Costs Associated With Hiring by Working With a Staffing Agency

You can lower your risk and avoid the cost of a bad hire by relying on a staffing agency to do the recruiting for you. With access to wide-ranging hiring networks and with insight regarding your field or industry, an established staffing agency can reduce both your recruiting costs and the risk factor. There are more than 20,000 staffing agencies across the nation; many of them specialize in three or more specific fields. Your organization or business can benefit when a skilled staffing agency enables your team to maintain its focus on your bottom line while the recruiting tasks are left to the specialists.