The adage goes, “if you hire clowns, you will end up with a circus.” Not just a circus but a really expensive circus. Let me start with the generalist statistic from PR News (2012). Of new hires, 46% fail within 18 months. Of new hires another 45% are only fair to marginal performers. That means that 81% of new hires are a disappointment. That is a really big number and comes at even bigger costs. The cost of a minimum wage bad hire has been cited to be $4,500 and change. Research in 2010 suggested the costs could be anywhere from 20% to 200%. In a survey conducted by Harris Interactive, commissioned by CareerBuilder, identified that 41% said a bad hire cost more than $25,000 and 25% identified the cost was over $50,000.
A mired of factors contribute to the cost of a bad hire, and we can quickly conclude that some of them are writing and replacing a job ads, screening candidates, phone calls and emails, arranging and conducting interviews, checking references and so forth. Most further understand that the impact and cost runs deeper, into area that are difficult to measure such as training, client impact, cultural impact, relocation, signing bonuses, and time.
The participants in the Harris Interactive research identified some of the costs:
Moreover a bad hire can impact below the surface in two distinctly damaging ways: first, bad hires may be less adaptive to change, distracting positive contributors, affecting the level of equilibrium of contribution in an organization. Secondly, bad hires affect the confidence of leaders – not to mention stress levels – an effect that often flows down management.
Asking the question “why a bad hire happens?” should be part of the HR recruiting process. The stage is often referred to as a postmortem or review, however this are a rare events in many processes, regardless of function, leading to these common reasons for failure:
Of course urgency is the biggest reason for a bad hire, but it should not be. HR process and policy should be encouraging a continuous talent pool from which to draw upon - a strong reason to work with recruiters. More over strategy communications are usually the cause and HR is surprised by resource requests. The physical impact of a surprise is increased heart rate and ultimately a reaction that is impulsive – not strategic – placing HR function and recruiters (internal or external) into a scramble frame of mind.
Hiring failures are ultimately a leader’s failure and in all cases an opportunity to improve. They are the leader’s expectations, the leader’s decisions, the leader’s process, leader’s relationships and so forth. Can we eliminate bad hires? Not entirely, however, reasons such as “did not check references,” “need to fill the job quickly,” and “insufficient talent intelligence” is far too often cited as the reasons, and where recruiters add value with proess and practise. The only truly reasonable excuse is – “sometimes we make a mistake” –as people, but not as process that is following strategy. To help avoid the costs of bad hires, which increase exponentially with the time a bad hire remains active, the following tips are compiled to help guide hiring managers and recruiters.
The first step to realizing the cost of bad hire is to understand that cost is ultimately the leaders responsibility - even thought recruiters often get the finger pointed our way - so learn from the fault, do a post-mortem on the process, close the gaps, fill the leaks, build strong and confident recruitment partnerships thereby decreasing the costs of bad hires.
Executrade – Your Recruitment Specialists
Rich Greenwald (Oct, 2010), How Much Does a Bad Hire Really Cost.