There are few things that are universal across varying industries and companies, but one thing they all share is the need to hire new employees. While the frequency and amount may differ from one organisation to the next, they each spend a large amount of money every year on the recruitment and effective hiring of new employees.
To minimise wasted expenditures and ultimately save on hiring costs, it is imperative that companies focus on putting the right person in the job the first time around. When an employee is a bad fit for a role, there are not only negative fiscal ramifications, but other less obvious costs as well. A bad hire can increase turnover costs, reduce productivity, and lower overall morale. With the cost of a bad hire threatening to impact more than just your bottom line, can your company afford to miss the mark?
What is the average cost of a bad hire?
Needless to say, hiring a new employee is very costly. According to the CIPD, the average cost to hire an employee in the UK is £6,125. If the employee turns out to be a bad hire, the company has lost both recruitment and training costs, plus they now must restart their hiring process to fill the position again.
These figures provide an indication of the cost of bad hires within your organisation, both at the individual and organisational level. Beyond these costs, there is also the impact on lost productivity and the added pressure on teams, draining time, resources, and momentum. Together, these ripple effects underscore the importance of making quality hiring decisions.
If you’d like to explore how we can help you reduce these costs and improve your quality of hiring, get in touch to learn more and speak to our team.
Realistically, companies may spend thousands of pounds to identify one hire who is a good fit for the role. On top of that, time and productivity losses occur when a bad hire leaves the company. This is especially noticeable if the employee was brought on to work on a project that has an approaching deadline or specific deliverable. So, what are some of the biggest consequences that your organisation can experience as a result of a bad hire?
3 ways the cost of bad hires impacts your organisation
1. Lower productivity levels
If cutting costs isn’t reason enough, a bad hire will also reduce productivity levels. Those who aren’t a good fit for the role will likely produce work and deliverables that are not up to par and require additional review, feedback, and development. Other employees are forced to take on the work that is not being completed – or is not being completed to your company’s standards – which puts additional strain on overall capacity and productivity.
2. Higher turnover costs
According to a report from the Recruitment & Employment Confederation (REC), a poor hire at mid-manager level with a salary of £42,000 can cost a business more than £132,000. Furthermore, if the bad hire is in a customer-facing role that’s visible to your customers, it can result in confusion, uncertainty, or even a lack of trust in your brand.
Read more: 5 tips for creating a realistic job preview that will reduce turnover
3. Reduce organisational morale
Finally, a bad hire can lower organisational morale. Hires who are not a good fit with other personalities in the organisation can lead to tension and strain within a team. That tension ultimately affects existing employees’ attitudes toward their jobs, other colleagues, or the company itself. Similarly, when staff have to help pick up the slack from a bad hire, they are working harder and longer with no additional compensation or change in job title. At times, these employees find themselves working on projects with which they are unfamiliar and were not originally hired to do. These are prime conditions for negative impacts on job satisfaction, employee engagement, and overall morale.
The impact of a bad hire
Bad hires affect more than the bottom line. They disrupt team cohesion, reduce engagement, and slow down strategic initiatives. The damage trail they leave behind and the resulting impact on incumbent employees is often understated. Recognising the full cost is the first step toward improving hiring decisions, reducing turnover, and protecting long-term business health.
How to avoid the cost of a bad hire
Higher turnover costs, reduced productivity levels, and lower organisational morale are just three possible impacts of bad hiring practices. The easiest way to avoid the cost of a bad hire is to put extra time and effort into hiring a good fit on the first try. Investing in finding the right fit results in numerous benefits for your organisation and for your existing employees.
There are many different tools available that your organisation can invest in to help you prevent bad hiring practices. These tools include behavioural-based interview guides, cognitive assessments, or personality-based assessments. It can also be beneficial to ask motivational fit questions in your interview, which provide additional insight into whether or not the candidate’s beliefs about work and the position are consistent with your organisation’s values.
The cost of bad hires can be intimidating when you look at the full picture, but the good news is that with a little extra work it can be avoided. The time and effort that you invest into hiring new, high-quality employees up front will pay off in the long run. Not only will your organisation avoid the financial cost of a bad hire, but you’ll also reduce overall hiring costs, minimise turnover, and maintain positive productivity and morale across your organisation.
The ultimate formula for a successful hiring strategy
In today’s market, it’s critical to have an effective, fast, and fair hiring process.
Our guide interviews industry experts to explore the key pillars for developing a successful hiring strategy and addresses how businesses can get the balance right through implementing assessment solutions that bring together speed, engagement, longevity, and fairness.
Download our interview guide to understand what makes a brilliant hiring process. You will discover the importance of:
- Focusing on the essentials
- Using robust data
- Evaluating the right fit
- Measuring for potential
- Providing equal opportunities for all