05. 05. 2023

The real cost of a bad hire

New employees are signing new contracts daily, and the hopes are always that the agreements will be successful and meaningful to all. And if all goes to plan, the costs associated with the new hire will be recouped, and the business as a whole will prosper. But what happens if the opposite is true? What is the true price of making a bad hire, and how can businesses avoid this at all costs?

How much does a bad hire cost?

According to research, businesses can expect to lose around £132,000/$165,000 each time they take on a mid-management employee who isn’t quite right for the role. This includes the fee accrued through the recruitment and hiring process, the cost of wasted training and the loss of productivity too.

And here are hidden costs to consider when it comes to making a bad hire.

A bad hire can affect staff morale and company reputation

If a new employee isn't the right fit for your company, there’s always the risk they can negatively affect existing staff, impacting on productivity and staff morale- not to mention the effects it can have on your company’s brand and reputation too.

Your company culture is important, and keeping existing employees happy is vital.

A bad hire can affect company performance

Taking on a new employee is always a risk. Training is essential to ensure that they’re able to reach full productivity, and this takes time. In most companies, other employees will be asked to take on elements of the training of new staff, impacting their own productivity and affecting their wellbeing too. And if that new employee doesn’t work out, it’s not just their own workload that’s suffered.

Training costs

Most new employees will take anywhere from three months to one year to reach full productivity, after which time a company can then expect to recoup the losses that occurred due to the recruitment process. And if you factor in the time spent by other employees carrying out the training, the true cost of training becomes apparent.

A toxic employee who is now fully trained will not benefit the business in the long term, and so the process must begin again, amassing more costs and further impacting staff morale and wellbeing.

The cost of a bad hire increases over time

It’s to be expected that new hires will take some time to reach their full potential, but companies need to be aware of the pitfalls that come with taking on the wrong person for the job. It might not be apparent straight away, and in some cases other employees might spot the warning signs first. Staff morale can suffer when management is unaware of a new employee who isn’t pulling their weight, so being able to spot the red flags is crucial.

At management level, a bad hire can have more negative effects, pushing the costs up much higher and raising the level of lost productivity exponentially.

How can you avoid making a bad hire?

There are steps you can take to ensure that your next hire is the right one. And there are warning signs that you can spot, to help you avoid making mistakes that could cost your business.

Analyze your cost per hire

Every new employee will come with a cost, and this should be considered before any other expenses. But this cost can vary, depending on a few factors: the type of role you’re recruiting for, the fees required by the recruitment agency and the length of time it takes to make the hire overall. The longer the process, the more it costs–so streamlining this as much as you can will always be beneficial.

Are you taking on temporary employees?

Temporary workers might be a solution for your company while you recruit your new team member, but bear in mind that this can be a costly process. Temporary staff don’t always reach full productivity in the short time they’re working for you, and costs associated with training might not be worth it in the long term.

Analyze your recruitment process

How effective is your job ad? Is your job description clear, are you consulting existing staff, and are you ensuring that the interview process is flawless?

From start to finish, the recruitment process needs to be slick, effective and precise if you want to ensure the right person is hired at the end of it.

Working with a trusted recruiter can help to cut down on the risks associated with making a bad hire, helping to streamline the entire process and ensure your next new recruit is a good investment. Get in touch if you’d like to know more about our specialist services here at Daniel Alexander, and how we can help your company today.