Bad Hire Costs Add Up

If you work in HR, you have likely come across a bad hire. And, while you and your hiring team evidently thought it was a good hire, something has gone awry. Now, your company has incurred unnecessary costs, loss of time and productivity. But do you know how much? A Career Builder survey of more than 6,000 hiring managers, worldwide, reveals some astounding stats.

First, let’s define a “bad hire.” A bad hire, according to the study, is someone who did not perform well or who was not a good fit for the job after all.

While that may not sound like the worst mistake in the world, when you calculate the costs on paper, it gets pretty daunting. For example, 27 percent of employers in the U.S. who reported a bad hire said that making just one bad hire cost more than $50,000. In Germany, 29 percent of employers reported losses of 50,000 euros ($65,231) or more. That’s a lot of money walking out the door.

And, more than loss of revenue and productivity, a bad hire leaves behind additional residue that may include a negative impact on client relations, employee morale and fewer sales. It’s a cumulative effect that can really cost a company.

In fact, one study by the Society for Human Resources Management (SHRM), says it could cost a company up to five times a bad hire’s annual salary. And, the higher the person’s position and the longer he or she remains in that position, the more the replacement cost will be.

The truly sad part is that bad hires can be avoided or at least substantially reduced by making sure that one simple step of the hiring process is always done correctly—the reference check.  Fortunately the advent of automated reference checking has made this step of the hiring process not only easy but also much more predictive of a candidate’s true potential.    Automated reference checking services like ChequedReference™ can gather detailed feedback from past employers quickly and easily.   What’s more the reference checking process builds a searchable database of high caliber candidates for future openings in your company.

So, now that you see the numbers in black and white, it’s time to stop letting those bad hires drain your bottom line. There are ways to improve the hiring process to ensure your good intentions don’t turn into bad hires. A free report: “A Guide to Talent Selection in the Modern World, Mistakes to Avoid and Practices that Accelerate Performance” is rich with case studies, process recommendations and action plans from some of the most innovative HR practitioners. It examines root causes and demonstrates how to incorporate science and technology to gain predictability and improve talent selection.

In the long run, it’s best to avoid a bad hire in the first place because it’s more difficult for the hiring manager and team to accommodate a poor performer when you compare it to recruiting quality candidates from the get go.


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