The Cost of a Bad Hire
This is the second article in this month’s series on ‘avoiding significant recruitment mistakes in times of skill shortage’. The full series can be found at monarchpersonnel.com.
When there is a skill shortage the potential for bad hires increases. Companies often underestimate or ignore the cost of a bad hire due to desperation or lack of understanding about its consequences. Here we take a look at how the cost of a bad hire reaches way beyond the cost of a salary.
Hiring during a skill shortage
With a lack of qualified job seekers to attract and choose between, companies are more inclined to offer a position to ‘the best of a bad bunch’ during a skill shortage, thinking that anyone is better than no-one. Not smart!
Monarch Personnel advocate recruiting on mindset. Mindset is instinctive whereas skill can be taught. Rather than recruit anyone who hangs around long enough to be given the job, if companies hire candidates based on their mindset they give themselves the opportunity to train unskilled, but potentially valuable, employees and avoid the pitfalls of a bad hire.
The monetary cost of a bad hire
According to the REC (Recruitment and Employment Confederation), a mid-manager level bad hire with a salary of £42,000 can cost a business more than £132,000. This cost includes:
- Wasted salary
- Wasted training
- Cost of recruitment
- Loss of productivity
- Lost productivity of the wider team
- Staff turnover
Many of these refer to the hidden costs of a bad hire that 33% of the 85% of recruiters that admit to making a bad hire refuse to believe exist! During a skills shortage organisations can’t afford to ignore these hidden costs that could cripple their financial position and productivity.
Hidden costs of a bad hire
Loss of productivity
New recruits work at a lower rate of productivity than their experienced colleagues. Add another employee’s time taken to train and support them and you are looking at a significant dip in overall productivity when onboarding a new recruit.
When the new recruit turns out to be a bad hire, this productivity comes at a considerable cost to the company. Furthermore, time take for re-recruiting further impacts productivity.
Impact on customer experience and a company’s reputation
When a poor hire is dealing directly with customers and therefore representing a company, the outcome can be catastrophic. Most customers are only interested in an exceptional customer experience and costs. Just one poor experience can make a customer look for an alternative supplier. In a competitive market there is little room for loyalty and understanding from customers, they simply move on.
Impact of a bad hire on team dynamics
Valuable existing staff can become frustrated with the time they have to spend mopping up the mistakes of a bad hire. This will unsettle the wider team and sometimes lead to conflict and resentment. In some cases it can result in good employees leaving.
A poor hire affects a company’s brand
A constantly revolving door will have a detrimental effect on a company’s brand. Being a good employer is now one of the benchmarks on which a company is judged. A good reputation as an employer enhances a company’s status, both commercially and in recruitment. A high turnover of staff raises a red flag and arouses suspicion around a company’s values and culture.
Recruiting on mindset
According to ThriveMap, employees who feel they’re a good fit for their role and culture of their employer rate their own productivity at 7.2/10. Employees who feel they are a poor fit rate their productivity at 5.3/10: these are the employees that are considered bad hires.
In times of skill shortage, at Monarch Personnel we would urge you to recruit on mindset to ensure that a candidate is a good fit for your business. We firmly believe that this will help you avoid all of the costs above, add value to your workforce and increase your staff retention rate.
Look out for the next article
The third article in our October series will be published next Wednesday, October 20th, in which we will be examining how a poor recruitment process can lead to losing the best candidates.
In the meantime, if you would like to learn more about Monarch Personnel, you can read our latest articles by signing up for our newsletter. You can also follow us on our social media channels: LinkedIn, Twitter & Facebook, or visit our website www.monarchpersonnel.com.