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The cost of a bad hire extends beyond the physical hiring, from running the advertisement to interviewing. If this decision is made in error, other areas of the small business are affected as well.


Many small business owners end up as fools because they hire badly. These bad hiring decisions cost thousands of dollars in profits.

What business can afford to stay in business when they continue to hire the wrong people or the right people continue to quit, creating more potential wrong hires?

Numbers Don’t Lie

Recently, Career Builder conducted a study on the impact of bad hires and revealed some troubling statistics not to mention costs.

Of the firms participating, 69% admitted to making a bad hire within the last year. For 41% of those businesses, the estimated cost for this negative decision was over $25,000.

Another 24% of those reporting said hiring the wrong person costs the bottom line more than $50,000.

The cost of a bad hire extends beyond the physical hiring, from running the advertisement to interviewing. If this decision is made in error, other areas of the small business are affected including:

  • Productivity
  • Training
  • Employee morale
  • Culture of the small business
  • Customer relationships
  • Legal issues

So what are some of the consistent characteristics of a bad hire?

The top issue at 67% appeared to be the inability of the new employee to produce a high quality of work. Not working well with others was the second top characteristic, coming in at 60%.

Then, a negative attitude (59%) was third with attendance at 54%. Finally, the fifth issue was customer complaints about the employee at 44%.

These firms identified the reasons behind bad hires. These reasons appeared to be more reactive and suggested a lack of alignment between strategies, structure, processes, rewards, and people.

With the fluidity of the workforce, having jobs filled quickly was identified as the major reason for bad hires at 43%.

Then not having enough talent intelligence such as that gathered through assessments was second at 22%.

Many firms still do not engage in using proper assessments to ensure a match between the potential employee, the position, and the enterprise’s culture.

The outsourcing and recruiting process followed at 13% and 10%. Not following an internal process of checking references was at 9%.

Preparation is Key

When working with clients years ago, I created a worksheet to itemize the cost of a new hire so that this awareness would generate an even more careful decision.

Of course, since we are dealing with humans beings, mistakes are made even when all the T’s are crossed and I’s are dotted.

Maybe it makes sense to hire for the fit within the enterprise first and then develop the skills, knowledge, attitudes, and talents necessary for that particular role.

Whatever method is employed, the employer should not be a fool by having a bad hiring process because who can afford thousands of dollars in lost profits?

 

About the author

Leanne Hoagland-Smith

Leanne Hoagland-Smith

Leanne Hoagland-Smith has over 25 years in sales. Her true joy is selling and…

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