The True Cost of a Bad Hire

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Quick question: How much does your organization spend to recruit, interview and on-board new employees? How much do you think it costs when a hiring mistake is made?

If you think the front end expenses are high, consider the massive cost over time of a bad hire.

HR managers estimate that bad hires cost their companies “thousands of dollars,” but that’s probably a conservative view. In fact, Zappos CEO Tony Hsieh once estimated bad hires had cost the company “well over $100 million.”

According to the U.S. Department of Labor, the price of a bad hire is at least 30% of the employee’s first-year earnings. But the financial cost is just the tip of the iceberg. The true danger – and hard-to-document expense – lies just beneath the surface, influencing important metrics like morale, productivity, engagement and turnover. One bad hire can:

  • Lower morale and productivity. People notice when you have the wrong person in a role. Left unaddressed, employees will begin to question leadership’s judgement, causing dissatisfaction in all areas of their work.
  • Cause more employee departures. Low morale isn’t your only problem with a bad hire. Like dominoes, one bad apple can cause even your best employees to actively seek employment elsewhere.
  • Create more work for teams. Departing employees, bad or good, take with them company knowledge. Needing to fire and rehire for a role means you’ll need to set aside time for your next hire to get acquainted with your team’s history, which takes time.

Powers Resource Center knows how important the selection and hiring process is. That’s why we recently expanded our talent management capability with a new selection assessment tool called PXT Select™. We are using this new hiring assessment with clients to provide insight into candidate’s cognitive abilities, behavioral traits, and interests, including tips about the candidate’s potential job fit and relevant job-specific interview questions. Get in touch with us here to get started!

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