At one point or another in our careers, we’ve all crossed paths with a bad hire.  Just think back – remember that lazy slacker?  Or the confrontational troublemaker?  How about that negative pessimist who spread a black cloud of doom throughout the whole office?

It happens – most people are on their best behavior during their interview, so a bad hire is hard to spot if you don’t know what to look for.  But that small mistake can cost your company dearly. The U.S. Department of Labor estimates the cost of a bad hire as high as 30% of the new employee’s yearly wages or salary. If your company has made a bad executive hire, you could be talking about serious money very quickly — or if you’re a small business, your bottom line could be severely impacted.

Bad hires affect your organization in all sorts of ways, from wasted time and lost productivity to the cost of replacing a poor worker. The problem is widespread, with Gallup reporting that disengaged employees cost U.S. businesses between $450 billion and $550 billion per year.

Your company may stumble into a poor hiring decision for any number of reasons. Maybe you hire someone just because you like them, assuming they’ll learn the skills they need. You might be acting under pressure to get that role filled as fast as possible. Whatever the reason, it’s important to understand the true costs of a bad hire and how you can turn your hiring process around.

Ways in Which a Bad Hire Costs You Money

That unfortunate hire can affect your business by wasting your time and money, and it can also have an effect on your company culture. Take a look at some of the key ways in which hiring the wrong employee can cost your company.

• Onboarding costs: A new hire costs time and money for training and getting them up to speed. A bad hire may require extra time to develop the needed skills. You could even be on the line for relocation costs.
• Lost productivity: Often, you realize a hire has gone wrong when your productivity numbers start dropping. You might see missed deadlines, overall slowdowns and employees failing to work together.
• Damage to your reputation: Once you start missing deadlines, the word is likely to get out that you’re not providing the services you used to. You also can’t trust a bad hire to represent your company well in any customer-facing position. As a result, you could lose clients or fail to gain new ones. You might also get bad online reviews, including on hiring websites, which could hinder your efforts to replace that bad hire.
• Legal fees: If you have to fire a worker who’s harming your productivity, you may incur the costs of litigation and other legal action.
• Negative impact on morale: One bad worker in a division can cause disgruntlement and negativity across the whole team. Without that bad hire, your team can stay focused on their goals in a positive environment.
• Recruitment costs: It costs money to conduct interviews, review resumes and handle other recruitment tasks. That bad hire means your recruiting team has to spend double the time (which means double the salary cost) when a replacement is needed. In addition, you’re on the hook for additional costs for job advertising and posts on job boards.
• Extra supervision costs: Your managers will rightfully spend a lot of time bringing a new hire up to speed — but when that person can’t get on board quickly, their focus gets pulled away. All that time spent supervising one poor hire could have been allocated to more important tasks.

How to Improve Your Hiring Process

So what can you do to make sure you hire qualified, high-performing candidates (saving time and money in the process)? We asked Hannah Criss, one of Mitchell Martin’s expert Staffing Specialists for a piece of advice.  She said “Bad hires can be sneaky and don’t always show their red flags at once. A few things I always look out for are candidates who aren’t willing to be flexible, try to change their minds last minute, aren’t excited about the role, or who struggle to give references. Taking the steps to ensure your candidates are 110% invested in the opportunity and have people who will speak on their behalf are great ways to avoid bad hires for your roles.”

Some other ways to help set up your hiring process for success are below:

• Overhaul your interviewing process: When your hiring managers work off the same set of appropriate questions for every interview, you’re better prepared to compare candidates and notice red flags. Pay special attention to candidates’ competencies, attitudes and motivation to assess whether they’re a good fit for your company and their potential role.
• Rewrite your job descriptions: Bring the team you’re hiring for into the process of writing the job description to make it easier for HR to vet experience, personality and skills.
• Streamline your hiring process: If you move slowly, you might lose your best prospects to your competitors. Bottlenecks can include any skills testing needed and the checking of references, both of which can be valuable for certain roles.
• Offer appropriate compensation: You’ll also lose your best candidates if your pay scale isn’t high enough. Hiring the right person is worth a little extra (just think of all the money you’ll save when you don’t have to replace them).

If this all seems daunting, consider working with a reputable staffing firm like Mitchell Martin.  Our recruiters are experts at finding not only the best candidates but also can spot the worst candidates so you can avoid them.  In addition, we have detailed historical records on millions of candidates in our database acquired over the course of 40 years, including performance data and feedback from previous employers.  Armed with this knowledge, we can help match the right candidate with the right job, to help you avoid hiring mistakes, save time, and mitigate hiring risks.