Do you know the true cost of a bad hire?
Unfortunately, most of us don’t.
If you did a search on Google, you will find all kinds of estimates and suggestions regarding the negative financial impact of bad hires. Some have even suggested that the cost of a bad hire can be up to twenty times the executive’s base salary!
Whatever the numbers may be, the financial impact of a bad hire should never be underestimated. Business Owners, CEOs, CHROs, HR professionals and Hiring Managers should never underestimate the negative ramifications of a poor hire.
The fallout can be extensive and could affect the entire organisation in ways that are not always obvious.
To get an idea of the negative financial impact of a bad hire, here are some indirect costs associated with it:
- lower personal productivity among dissatisfied employees
- disruptions caused by dissatisfied employees
- higher turnover rates among productive employees
- damages to reputation and market share
- lost management time
- increased stress and anxiety from people problems
- poor employee morale
- lost business opportunities
What about Direct Costs?
The following will help provide you with a better idea of the direct financial cost of just one bad hire in your organisation (depending on the seniority of the position):
- Recruiting Fees
- Background Checks
- Employee Referral Incentives / Fees
- HR Department time and expenses
- Hiring Manager’s time and expenses
- Travel expenses
- Base Salary
- Relocation Costs
- Employee Perks (car, house, etc)
- Vacation/Time off
- Stock options
- Severance Pay
- Legal Costs
- Outplacement Costs
- HR department time and expenses
Multiply the total cost by the number of bad hires in your organisation and you will begin to realise the astronomical cost of bad hires and the extensive impact it could have on your organisation in the long term, and the opportunity costs to your organisation.
Obviously, the total cost of your bad hire depends very much on what benefits or perks he or she has, and it also depends on whether your organisation is a Multi-National Corporation (MNC) or a local business.
Whatever it is, the total cost of one bad hire could really add-up for you and your organisation.
So if you are a Business Owner, CEO, CHRO, Senior Executive, HR Professional or a hiring manager, then you should be concerned. Problems with bad hires are like a cancer that will slowly and silently destroy your company from the inside out. And these diseases often times creep up on you on the quiet, and by the time you realise what has hit your organisation, it might already be too late.
Problems with bad hires are like a cancer that will slowly and silently destroy your company from the inside out. And these diseases often times creep up on you on the quiet, and by the time you realise what has hit your organisation, it might already be too late
So how can you avoid making bad hires for your team or your organisation?
Stay tuned for more information.