The cost of a bad hire (and how to avoid one)

The cost of a bad hire

Competition in the job market continues to stay fierce. In this environment, candidates often resort to practices such as embellishing or misrepresenting themselves to appear attractive to companies that are hiring. Some trained HR professionals might spot these details, but many of these so-called facts may not reveal themselves until you conduct a comprehensive background check. It's becoming more crucial to go deeper than what you see on a candidate's resume. Use this guide to understand the cost of a bad hire, and take steps to avoid making the wrong hiring decisions.

What's the cost of a bad hire?

The monetary cost of a bad hire can be astronomical. Gallup's "State of the Global Workplace: 2022 Report" estimates that disengaged employees cost the global economy $7.8 trillion in lost productivity, amounting to 11% of the global GDP. Yes, that's trillion with a T.

To put this number into perspective, the Society for Human Resource Management (SHRM) found the average cost of a new hire to be nearly $4,700. SHRM notes many employers find the costs of a new employee to be much higher, likely around three to four times the position's salary. That means when hiring for a job with a $60,000 salary, you might spend a whopping $180,000 on recruitment, hiring, and training. What's worse, when you make a bad hire, that decision can quickly impact your business in various ways, including:

  • Lower productivity
  • Compromised quality of work
  • Negative effects on team morale
  • Lost time to recruit and train another worker
  • Cost to recruit and train another worker

How to avoid a bad hire

No one wants to make a bad hire. Luckily, there are plenty of ways to ensure you build the best possible team for your business. Follow these steps to avoid making the wrong hiring decision:

Be specific about the requirements

Finding the right hire starts with the job description. In the job posting, be specific about the requirements you have, especially if some candidates may find them undesirable. For example, if you need someone who can work nights and weekends, include that in the job description. As you screen candidates, ask them right away if they can meet that requirement. If not, you can move on to someone else without investing any more of your time.

Consider using skills assessments

A skills assessment may not make sense for every position, but if you're hiring for a role that requires technical skills, consider asking candidates to complete an assessment. For example, you may ask candidates for a programming position to take a short coding test to ensure they can identify and resolve errors in code. This type of assessment can help you quickly weed out candidates who don't have the necessary skills for the role.

Contact references

One of the best ways to learn more about a potential employee is to contact people who have worked with them. Ask for a candidate's references as part of the interview process instead of saving this essential step for later. Use reference checks as an opportunity to verify the information an applicant provides. Additionally, ask specific questions about the candidate's work ethic and teamwork skills to learn how they may perform at your company.

"Ask for a candidate's references as part of the interview process instead of saving this essential step for later."

Conduct better background checks

You know background checks are a key part of the hiring process, but are you conducting them the right way? Here are three tips to follow:

1. Establish a standard policy. Having a mandatory background screening policy for every employee in an institution, from entry level to C-suite, not only provides clear guidelines, but it also eliminates any appearance of inconsistencies when making checks.

2. Don't forget international background checks. The workforce has become more global than ever before, and it's best practice to check the backgrounds of all applicants who were born, educated, or employed outside the United States.

3. Know the regulations. There are regulations at both state and federal levels. You can't access some information, such as arrest records that did not result in a conviction, via a background check. The Fair Credit Reporting Act sets national standards employers must follow when conducting an employment background check.

Recruitment red flags

With a holistic recruitment strategy, including thorough background checks, you can reduce the chances of making the wrong hire for your business. Here are more red flags to consider when evaluating candidates for an open position:

  • The candidate takes multiple days to respond to your questions or interview request.
  • The candidate shows up late for an interview or cancels at the last minute.
  • The candidate doesn't know basic information about your business, such as its mission or target customers.
  • The candidate has no questions for you about the job or the company.
  • The candidate has a difficult time discussing their past work or explaining their career achievements.
  • The candidate doesn't seem passionate about the role or industry.

Before making a job offer, learn as much as possible about your potential hire. If you hire the wrong person, you'll likely find yourself looking for ways to reassign the employee or to fit them into the organization in some other way. Eventually, they may become a satisfactory employee for your business, but there's also a chance it just won't work out. Either way, that bad hire is a drain on resources. Following the tips in this guide can help you make the right decision the first time.

More tips on hiring the right employees:

In a tight labor market, try these strategies to find and hire top talent for your business.

It's easier to avoid a bad hire when you know these secrets to getting the best job applicants.

Eliminate common hiring time wasters so you can focus on finding the best candidate for a position.

When you need a new employee quickly, consider using a staffing firm to streamline the hiring process.

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