People Magazine

Why hiring the wrong person costs more than you think

Cost of a bad hire
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Good recruitment practices are essential for the overall performance of a successful company.

The quantifiable financial implications of hiring the wrong person can be astronomical.

A bad hire can also cause short-term and long-term issues with all aspects of the company’s productivity.

There are methods you can employ to guard against the potential to hire the wrong person.

Business is about people.  No matter what your company does, its performance is directly related to the people who work for you.  Even companies with little face-to-face consumer time still rely on the employees to perform their function effectively; otherwise, things don’t get done, systems break down, and the company begins to lose money; pretty much every businesses nightmare scenario.

A Bad Hire

Given that universal fact, it stands to reason that companies need to prioritize their recruitment practices and make sure that they are hiring the right person, no matter the role.  But that isn’t always the case.  Many companies still don’t focus enough on the types of employees they want in their organization and find themselves stuck with a bad hire they can’t account for.  Worse than this, they are about to discover the true cost of a bad hire; spoiler – it’s way too high.

The reality is that while hiring the right person can result in an increase in morale, performance, and profitability, hiring the wrong person can have just the opposite effect, pulling down the company’s productivity and risking the loss of customers and income.

A Costly Mistake

The alarming cost of a bad hire has become so noteworthy in recent years that a variety of studies have been able to determine that there are actual quantifiable financial costs associated with a bad hire.   According to the US Department of Labor, the cost of a bad hire can be over 30% of their annual salary this is a figure that could quickly escalate if this isn’t a single mistake.  When interviewed about the cost of a bad hire, US online retail giant Zappos CEO Tony Hsieh estimated that it had cost his company over $100 million.  For small companies, the astronomical costs associated with investing in the wrong person can have devastating effects. But it isn’t just about the money you can measure, the unquantifiable cost in morale and productivity can be far more poisonous to your business.

The longer a bad hire is in your organization, the more damage they can do. If a disengaged or poor employee doesn’t pull his weight, it is often left to their colleagues to pick up the slack.  That is a situation that can escalate incredibly quickly and if unaddressed, leave your good employees with a bad taste in their mouths that they might not be able to shake.  Bad habits can spread like a virus in certain organizations.  Poor performance, bad attitudes and low commitment emulating from one individual can infect those around them, which immediately effects team performance and the company culture as a whole.

The Dos and Don’ts

Luckily, there are a few important ways in which you, as the HR or Hiring Manager, can mitigate the chances of a poor hire:

Don’t limit your scope of skill set.

Just because a role calls for a technically minded individual that doesn’t mean that should be the only aspect you evaluate. Take the time to look at their character, personality, and background as a whole to see if they would fit within the culture of your organization.

Do trust your instincts.

Whether we like it or not, often if we have to rid ourselves of a bad hire, it doesn’t come as much of a surprise as it should. This is usually what happens when we ignore the niggling questions we might have and assume everything will work out fine.  If you are an experienced HR or Manager, you know your company, and you know best who will work out and who won’t; don’t miss the chance to use that vital resource.

Don’t skip the references.

The tail end details on the end of people’s CV have remained an essential element for a reason. References are important, don’t skip them, no matter how good your instincts feel.  Make sure you are getting the real story and develop the ability to read between the lines.  If in doubt, get people on the phone and since their tone when they talk about this employee and just how positively they view them.

Do include an outsider’s perspective.

Ask for the opinion of colleagues, particularly those with whom this person will be working. It doesn’t have to be superiors either; often the opinion of subordinates is well worth hearing in these matters.

Don’t rush the commitment.

There are a few ways in which you can stagger the hiring process before commitments are made, or contracts are signed, even here in the UAE where employees must have visas to commence work. You can initiate a more tiered recruitment process and have the potential employee undertake specific scenario examples to see how they will react.  You can also institute a trial period, either before or in conjunction with their probation, in which certain expectations must be met.

Do set clear objectives.

If you are at all worried about a potential hire (and even if you are not), an excellent way to start the relationship is by setting clear, accountable KPIs and targets. Make sure they know exactly what is expected of them, that they have the tools to achieve it and that these are the factors against which they will be measured.

Don’t run out of time.

These days HR personnel, particularly in SMEs, have an immense amount of responsibility. They can often find their days dominated by time-consuming routines and less essential administrative tasks.  By considering adopting an HR software solution such as Aqeed People, they could structure their role more effectively and give themselves a greater chance of building connections with their employees and being on top of their well-being and performance.  They would also be far more likely to spot bad hires, quicker.

Incorporating even some of these practices into your recruitment processes can go a long way to reducing your hiring costs and protecting your company from the long-lasting effects of a bad hire.  It is essential to your organizations’ overall performance that HR and Hiring Managers can consider the very best strategies and the most effective solutions when it comes to recruitment.  It will always be worth it in the long run.

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