What It Really Costs Your Business When You Make a Poor Hiring Decision

As an experienced team leader, you may have had to ask yourself how much money has been lost due to a bad hire on more than one occasion. Could you provide an estimate of the amount?

It has been found that after 18 months in their job, 46% of new workers have been unsuccessful. Consequently, it is important to acknowledge this and take steps to rectify the situation, rather than feeling guilty.

Who makes a lousy employee?

Having an unsuitable employee in a team can create an additional workload for all involved. As an example, the Spanish TV show ‘La Casa de Papel‘ highlights this issue. The protagonist, The Professor, was the leader of a criminal gang and had planned meticulously for a potential police response. He also provided strict rules and instructions for the bank heist, and spent several months training his team. In the end, did the robbery succeed without any issues? Unfortunately, not.

Rio and Tokyo were two invaluable members of the team, excelling in their respective fields; Rio in hacking, Tokyo as a bodyguard. Despite their exceptional skills, they developed a personal connection which caused problems for the rest of the team. Fortunately, the team were successful in their mission of pulling off a bank heist and managed to make it to safety on an exotic island.

Until Rio and Tokyo breach the rules again, necessitating the team to work together to secure another bank, it begs the question as to why such poor hiring choices were made with these two individuals. Whilst it is true that a plot cannot exist without a certain level of tension, they have the skills to make it happen. However, it is important to consider if you would take on someone who is a potential liability and of unknown character to your organization. It is likely that you would prefer to ensure productivity rather than excitement within the company.

When You Make a Bad Hire, Here’s What Happens to Your Team

It is essential that the person you hire is a good fit for your existing team. Having everyone working together in harmony is essential for the growth of the business, regardless of their experience, but this is especially true in remote companies. What would be the consequences of hiring someone who does not fit in with the existing culture of the business?

Reduction in Efficiency and Cooperation

Incorrect recruitment decisions can have a detrimental effect on a business, as an employee who is not a good fit for the company culture is unlikely to contribute to the achievement of its goals. Over time, staff may become frustrated with inadequate performance, failure to meet deadlines, and changing customer requirements.

Client Attrition

Clients are likely to begin looking for alternatives, and competitors, if your team consistently delivers projects late.

Reputation

In today’s competitive business world, it is essential to maintain a positive reputation. You have worked hard to cultivate your company’s image over a period of time, so it is important to ensure that customers are dealt with by the right person. Incorrect handling of customers can have a detrimental impact on your business and the quality of service they receive.

Time Spent in Charge of Supervising

A poor hiring decision can have implications beyond just causing delays in delivery. When managers are responsible for an individual, a greater amount of time spent on that individual can lead to less time and energy being available for other tasks.

Payroll Expenses for New Employees

Recruiting and training employees can be a costly and time-consuming process. Many of the resources available to aid in the job search require an investment. Additionally, the recruitment process requires significant effort from the staff, such as creating job postings and reviewing resumes. The training of the new hire is the final step in the process. It is important to bear in mind that, even with an efficient onboarding plan, training still demands considerable time and energy from both the employer and staff. Therefore, it is essential to ensure that the right individual is recruited to avoid wasting time, effort and resources.

Hiring the wrong person can have a detrimental effect on team morale, so it’s important to consider how a potential hire will fit into the team’s dynamic. To help prevent this, we have established the ‘No Asshole’ rule. Poor hiring decisions could lead to long-term implications for your staff, so try to bear this in mind when weighing up the pros and cons of keeping a potentially negative hire in order to maintain team cohesion.

How Much Does It Really Cost to Make a Bad Hiring Decision?

The human resources lost due to a bad hiring have been the focus so far. Shall we make an effort to put a price tag on these expenses?

According to SHRM, it typically takes 42 days and costs an average of $4,129 to fill a single position. The U.S. Department of Labor has stated that the cost of a poorly made hire can be as high as 30% of the employee’s salary in the first year. Furthermore, Gallup has estimated that incorrect hires cost United States companies roughly $450-550 billion annually in lost productivity.

Results from a recent survey of CFOs showed that 34% had experienced a significant impact on productivity and team scheduling due to poor hiring decisions. Furthermore, supervisors were found to be spending 17% of their working week dealing with employees who were not productive. This is an unacceptable loss of working time for any organization.

Research revealed that 74% of businesses that experienced a bad hiring decision reported a monetary loss of an average of £14,900 in revenue.

Small businesses in particular will be adversely affected by these prices. It is not advisable to ignore these figures and assume that the impact on your business will be negligible. This is unlikely to be the case.

Incorrect Employment Decisions: How to Prevent Them

It is possible for any of us to make an incorrect hiring decision. It is important to recognize when an unsuitable candidate has been hired and to take steps to rectify the situation.

The Telltale Signs of a Bad Hire

  • Lackadaisical Approach to Quality Control
  • Even after being corrected, they continue to make the same errors.
  • They lied about having talents on their resume that they didn’t have in practice.
  • They are always finding fault and never willing to accept responsibility for their actions.
  • Always late and underachieving, they are a pain to work with.
  • Workplace tensions between them and their colleagues are a constant source of complaint.
  • First and foremost, customer complaints.

Troubleshooting a Bad Hire

It is evident that there is no straightforward resolution to this issue. To address the deficiencies, it may be beneficial to arrange several evaluation meetings to assess the matters. Alternatively, it might be advantageous to give the substandard employee another opportunity by relocating them to a different department where their skills could be better utilized.

It is advisable to take action sooner rather than later if a certain approach isn’t successful. As a team leader, it is not beneficial to delay making difficult decisions in the hope that an employee will have a sudden epiphany and become the ideal team player. Your team’s opinion of you may be affected if you postpone making a decision. Ultimately, being candid and letting go of a poor employee may be the best option.

Optimize Your Hiring Methods

Improving the recruitment process is the most effective way to reduce the risk of hiring unsuitable individuals. Identifying unsuitable candidates early on will help to prevent any potential issues from arising.

At Works, we have developed a refined process for remote hiring which takes into account a candidate’s soft skills and attitude. This ensures that the right decision is made when it comes to hiring, as someone who is not dedicated to the recruitment process is unlikely to be dedicated in the role.

It is clear that identifying and selecting the best candidates can be difficult. To ensure the success of the recruitment process, it is important to learn from past mistakes and take into account the advice of your team. If you require any further assistance, please do not hesitate to contact us.

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