The Cost of a Bad Hire (and Tips for Making Better Choices)

The potential cost to your business of hiring the wrong person is staggering. We look at how this is calculated and take you through a recruitment process to help you choose the right candidate for the job.  We know it is time consuming hiring staff, but once you realise the cost of making a mistake you might feel better about investing the time.

The Scenario

You run a small business and you need to hire a new administrator with a total salary package of $45,000.  You are frantically busy but this has to get done so you place a couple of online ads and collect some CV’s.  You review the resumes as best you can over a couple of nights and shortlist down to 10 interviews.  You manage to squeeze these interviews in between meetings, and wax lyrical with the candidates about your vision for the future of the company.  You make your choice and although you mean to check references, time gets the better of you.  Your new hire starts on the 1st of July and by the end of September you know for sure you’ve hired the wrong person.

The Cost

According to US based, HR World’s bad hire calculator this whole exercise has just cost you over $57,000 (that’s only valuing your own time at a $60K salary package) and you are still running around like a chicken with its head cut off because you don’t have the administrator the business needs.

What To Do About It

If any of this sounds in the least familiar then it might be time to put some greater rigor into your hiring process.  We provide below a list of processes you should consider putting into place to tighten up your recruiting.  These may feel time consuming while you are hiring – but just keep the cost of making a mistake in the back of your mind and you’ll get through it!

  1. Profile Your Ideal Candidate Before You Start

The most important step to good hiring is being clear about who you are looking for.  What skills must they have from the outset, and what skills are you prepared to train for?  What personality traits are important to do the job and to fit into your company culture?

  1. Prepare the Right Questions

Based on the profile, prepare questions and/or tests in advance that measure the candidates fit with the profile.  If it’s important that the candidate be able to handle stress then ask:  “What has been the most stressful situation you have ever found yourself in at work? How did you handle it?”  If the candidate must have strong written communication skills then ask them to write a short report or presentation.

  1. Listen

Too many interviewers spend more time talking than listening.  Whilst it’s important to sell the candidate on your business, it is even more important that you are sure they are right for the job.

  1. Don’t Settle for the ‘Best of a Bad Lot’

When you feel desperate to fill a role it is tempting to settle for someone you think is adequate.  Try to avoid this temptation!  You are better off to start the search process again, than to hire someone you may need to let go 3 months from now.

  1. Check References

It’s a pain at the time but always check references, and preferably check them yourself.  Ask previous employers how the candidate fits with the profile you have created.  It’s a myth that candidates only use referees who will say good things.  If you ask specific questions of referees you are likely to get some vital information about how the candidate will operate in your organisation.


See also these related articles:

Are You Really Hiring the Person You Think You’re Hiring – guidance on how to conduct a thorough background check.

When Employees Don’t Work Out – how best to handle a dismissal.

Hiring a Contractor: The Pros & Cons

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