The Other Cost of Bad Hires

Statistics show that the cost of a bad hire is 11⁄2 times the annual salary of the position. This takes into consideration the cost of severance pay as well as the cost of recruitment and training. What is not included is the collateral damage felt throughout the organization when a person is not the right fit with the position and the culture of the organization.

When people recruiting are asked what they are looking for in an ideal candidate, the answer is almost always “the right fit”. This appears on the surface to be a very generalized descriptor but those three words prove over and over again to be the most critical criteria in determining the success of a candidate.

What exactly does “the right fit” mean? It is hard to define. In my mind it means the position being filled fits with the knowledge, skills, experience and career goals of the candidate. It means the compensation and benefits align to the expectations of the candidate. And it means that the values, behaviours and personality of the candidate fit with the norms of the organization’s culture.

In the battle to find “the right fit” we are often tempted to compromise on some areas because the candidate is willing to settle since he/she is out of work and has bills to pay. We may decide to hire someone whose background is in leadership into a non-leadership role even though there are some indications the person will struggle with not being a leader. We may decide to hire the person whose salary expectations are above those of the position but they agree to take a lower salary. We may decide to hire someone who has always worked independently into a strong team environment. Sometimes these risks pay off. Often they don’t.

The organization will suffer financial costs from the bad hiring decision but the other cost we often forget is the impact on other employees. When there is a bad fit, it is obvious. Whether it is a personality issue or a performance issue, those who work with the individual will struggle on a daily basis and this can have a negative impact on morale. Not only that, but a bad hire can erode trust in leadership as staff wonder how the person got hired in the first place and why leadership is not dealing with the issue. Once the person moves on, organizations are left cleaning up the mess left behind and rebuilding teams and morale.

So be careful about what you compromise on in the hiring process. And if you make a bad hiring decision, recognize it quickly, admit the error and part ways. If you try to hold on and make it work, other productive and engaged employees may decide they need to leave. And that is the other cost of bad hires.

Elizabeth Hill
Managing Partner


Posted Sep 6/19 by Pesce & Associates