Do You Know the True Cost of a Bad Hire?

Client Resources | February 20th, 2019

Zappos CEO Tony Hsieh once said that bad hires cost his company more than $100 million. While your company may not be racking up a similar number, it’s hard to argue that bad hires are an unnecessary cost that companies should be doing everything they can to eliminate.

More than just dollars and cents

The direct financial impact of any bad hire should be relatively easy to figure out. Simply determine the number of customers you lost, resources they wasted and assets they damaged.

However, the cost of a bad hire goes way beyond lost business or wasted supplies. One survey of CFOs found they were more concerned with lower morale and productivity than they were with direct financial costs.

Business executives understand that a bad employee is a drag on the entire team. A bad hire also forced good workers to do damage control, whether it be by taking on more work or fixing work that wasn’t done properly. This added stress on top performers could put the company at risk of losing them as well.

Even if top performers don’t get frustrated to the point they quit, they could become disengaged from their jobs. Engaged workers are more productive than non-engaged workers and they are hard to come by. Surveys regularly show that only around one-third of U.S. professionals say they are engaged with their job.

In many ways, a bad hire’s impact on business culture goes way beyond the worker’s stint. Poor performers lower the standard for other staff members and bad habits can spread like wildfire. Even after taking the bad worker from the equation, the business still had to devote time and resources to hitting the reset button with staff members who were impacted by the situation.

Spotting a potential bad hire

While bad hires are difficult to spot, there are a few hiring best practices you should follow in order to minimize the odds of making a costly hiring decision.

Bad hiring decisions are often the product of a bad process. One best practice is to set up part of your interview so it resembles an actual job situation, one that a candidate must navigate. For instance, if you’re hiring for an account executive position, have applicants present a company product in a role-playing situation. This can allow hiring personnel to assess how applicants might handle themselves in a pressure-packed sales situation.

A good process should prioritize checking candidates’ references. Regardless of how well you think you know a candidate, talking to references almost always provides new insights and clarifies misconceptions.

Finally, it’s always good to trust your instincts. If you see subtle red flags that point to a character issue with a particular candidate, it’s a good idea to move on to another applicant.

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At ZDA, we strive to take the guesswork out of the hiring process for our clients. If you’re currently looking for a talent acquisition partner, contact our top supply chain recruiters today!

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