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The hidden cost of a bad hire

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Bad hires are bound to happen. Occasionally we all make the wrong call and it would be unreasonable to expect otherwise. However, a recent report by the Recruitment and Employment Confederation (REC), highlighted a potentially worrying level of bad hiring in the UK. In fact, as many 40% of hires seem to go bad within the first 18 months.

In the spirit of fair play, we should probably temper that figure a little bit with the recognition that survey data cannot always take in the full extent of the situation or forces at play (for example a low unemployment rate and the rise of the economy could be factors) but never the less, that is a worrying figure. The reason it is so important is that a bad hire has ramifications that extend well beyond the need to replace a team member. When you explore the reality of a bad hire, it reveals a hidden cost that is quite startling, and this is particularly true if it is at management level.

  • A bad hire can impact on team cohesion and morale. We have discussed the importance of job satisfaction and the need for clear leadership in some recent articles. It is vital that your workforce sees the management team as stable, knowledgeable and approachable, or the goal of job satisfaction, which in turn leads to a more productive team, will inevitably move further away. Either the bad hire will result in disruption prior to the manager leaving or it will result in disruption when they leave. Either way, you have a less effective workforce, and that impacts directly on productivity.
  • A bad hire costs in re-hire. Not only does the hiring of staff have a clear financial cost but we also need to factor in the time that is taken up with the hire process and the impact this has on human resources, or in smaller businesses, directly on the time of the senior management team. If you want to see how much that could be, work out the cost per hour of each person in the chain in real terms and then add that to the cost of the hire process.
  • A bad hire can cost in other staff. It is difficult to estimate exactly what the actual numbers are for this one, but we can appreciate it nonetheless. A bad hire isn’t always about an unpopular person in the workplace, but it can be. A bad manager can end up driving away good workers, and if they have hiring responsibility the addition of people who reflect their own values and personalities. So, when they finally leave, their legacy is one of an already toxic team.
  • A bad hire costs more money than many people account for. In the REC report, around a third of those who took part believed a bad hire didn’t cost anything. We politely beg to differ. If you hire someone, you invest in their career. Regardless of the level they enter the company, you will pay their salary and other wages costs, invest in their development, do all their initial and ongoing in-house training and in a lot of cases pay for them to do additional training. In the same report, it was estimated that a bad hire of a manager on £42,000 a year could cost the company upwards of £132,000. It is reasonable to assume that ratio more or less carries through at all salary levels.

While there is no way to avoid the odd bad hire, using a reputable, long-established recruitment company that really gets to know your business and has the experience of your sector can certainly reduce the risk. It goes a long way towards removing the danger that you will end up settling for what seems the right person rather than getting the right person. Of course, there is also the option of a temp to perm when using an agency, which gives you the opportunity to try before you buy.

Looking at the points in this article you can see why more and more clients are turning to us to help reduce the chances of a bad hire. If you would like some expert help with your next staff appointment, get in touch with a member of our team to find out how we can help you by calling 0800 7830247 or visit our website www.24-7staffing.co.uk

https://www.rec.uk.com/news-and-policy/press-releases/hiring-mistakes-are-costing-uk-businesses-billions-each-year-rec

 

 

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