THE COST OF A BAD HIRE
- Finding the right people to join your team can transform your company. On the other hand, hiring the wrong people can have devastating effects.
How common are bad hires?
- 48% of employees have lost money from dismissing an employee.
- 62% of UK employers report having been affected by a bad hire in the past year.
- 75% of demand for new employees is simply to replace workers who have left the company.
What does it cost to fire a bad employee?
- Redundancy payments made by UK employers: 1) 2009/10 - £4.5 billion; 2) 2010/11 - £4.5 billion; 3) 2011/12 - £4.9 billion.
- The average redundancy settlement in 2011/2012 was £11.951.
- This is almost six months' pay for a worker earning the UK's median salary of £26.200.
It's not just the redundancy payments that will affect your company
- Bad hires bring with them a number of indirect costs too. When employers were asked about the indirect costs they'd experienced as a result of a bad hire, here are the most common responses: 1) Reputational damage:
Mistakes made by bad hires, especially in front of clients relations and the way your company s viewed - 22%; 2) Internal disruption and effects on morale: Other employees may be asked to pick up on additional
work due to the shortcomings of their colleague - 36%; 3) Wasted time training: This is a sunk cost that cannot be recouped, the money could have been spent training a better employee who will repay the cost by
producing results; 4) Inefficiency and lost work days due to absence: These are opportunity costs that would not be incurred with a better employee - 41%.
Stop the problem at the source!
- Aim to reduce the number of bad hires in your company by making sure you always:
- Conduct personal interviews. Finding out about a potential employee's skill level and work experience is crucial, but you should always try to get to know your hires on a personal level. A more in depth conversation
about their hobbies, interests and experiences will give you a better idea of whether they will be a suitable fit for your company. This is especially important for SMES with small teams working closely together.
- Check adequate references. There is only so much that an employer can discover from an interview. Reference checking will tell you the things that a candidate does not want to tell you themselves. It is equally important
to verify the referees themselves, whether through technology or a old-fashioned phone calls, to make sure the person giving the references is genuine.
- Have a trial period. The vast majority of employers do not have any form of trial period before offering a full time role. Probation periods give both parties the chance to directly experience the organisational fit. The
applicant gets the chance to impress their potential employer and colleagues, and the employer gets an extended look at the applicant so they can spot things (positive or negative) that they would otherwise have missed in a
30 minute interview.
Always remember: Great companies are built by great employees | Sources: BBC; HR Magazine; Workforce Management; Ipsos; MORI; EMW.