Making a bad hire is one of the most common issues for companies. In fact, 95% of businesses state that they’ve hired the wrong person for the role at least once during a year. However, many company owners are still not aware of the true cost of a bad hire.
As recruitment services specialists, the Olinio team knows that it goes way beyond the initial recruitment expense and the salary paid to the bad hire. In this article, we will uncover all the ways in which the wrong hire can hurt your business.
But first, a few words on how to spot the newly hired misfit.
The Key Warning Signs of a Bad Hire
From our own observations and discussions with clients, these are the biggest red flags that you may have ended with a bad hire:
1. Sudden Change in Personality
After a few weeks, you notice that the new hire has shed their professional and courteous attitude. They are rude to colleagues, refuse to collaborate with them, start showing up late for work, etc.
This is not an accident – these are their true colours. Do not let this person disrupt your entire team dynamics. Accept that you’ve made a mistake and let them go.
2. Poor Performance of Their Duties
Many candidates overinflate their skills and experience in the resume in order to get a job. For instance, they may claim proficiency in using a software suite, but are barely able to access simple functions.
This is why a practical skill test is a must for avoiding bad hires. While it makes the recruitment process longer, it effectively weeds out unqualified candidates.
3. Lack of Alignment with the Company Culture
Some hires stick out like a sore thumb among your employees. They do not follow the dress code. They make inappropriate jokes. They use company resources and assets for personal purposes.
If they are unwilling to stick to your basic internal rules, how can you trust them to comply with your customers’ specifications and requirements?
What Is the Cost of Hiring the Wrong Person?
Let us return to the main topic of this article. How much does it cost your company if you make a bad hire? These are the most common types of costs:
1. Salary Costs
According to a reputable research and advisory firm, the financial cost of a bad hire can go as high as 30% of the respective employee’s annual salary. In numbers, this means:
- EUR 3,500 for an executive
- EUR 1,300 for a mid-level manager
- EUR 1,100 for an emerging leader
- EUR 900 for a mid-level employee
- EUR 600 for an entry-level position.
That is a lot of money, especially if you are hiring for multiple positions at the same time and end up with three or four bad hires.
2. Lost Business
A bad hire can lose you an important client by botching important projects. It can cost you potential clients by having the wrong attitude when interacting with them.
Essentially, your company may stand to lose tens of thousands of Euros, all due to a single employee who should not have been hired.
3. Reputational Loss
A client who had a negative experience dealing with a bad hire has a huge platform for venting their frustration: the social media. They can also leave negative reviews on Google and other websites, such as:
- Yelp
- Trustpilot
- Tripadvisor
- Foursquare.
These are websites customers often check before doing business with a company for the first time. If they see a lot of negative reviews, they will distrust your business and look for a competitor.
4. Low Team Morale
Another hidden cost of bad hire is reduced team productivity. A single person can break the harmonious collaboration between the other employees, create conflicts, and build mistrust.
And the longer the bad hire stays, the worse these issues will get. Long-standing team members will feel that they are being sidelined and will start questioning their loyalty to your company.
5. Reduced Ability to Attract Top Talents
Last but not least, savvy job seekers will get wind of your poor recruitment choices. They will not want to become part of a toxic work environment, where they cannot showcase their skills and advance their career.
Thus, one huge cost of bad hires is the inability to replace them with the right people, because they will not apply to fill your vacancies.
The Best Way for Avoiding Bad Hires: Work with Olinio!
Working with Olinio guarantees that all your new hires are the right fit for the job. With our tested and proven recruitment techniques and our global reach, we can find the right people for any job. From crafting the job ads to asking targeted questions during interview, we can spot candidates that do not fit your requirements and remove them from the list of applicants you get to choose from.
Reach out to us today and let us find the perfect person for your job opening!