The Cost of a Bad Hire And How To Avoid It

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I have personally interviewed and met hundreds of potential candidates over the last 15 years. That translates into a wealth of knowledge about a market (in my case, the Netherlands) . . .  and as with such things, knowledge begets more knowledge, putting the recruiter in the position of having access to news, information and facts from and about the market as a whole, both positive and not so positive – all information that has a value. Understanding how to use that knowledge to avoid a bad hire that could cost your company thousands is ultimately what I specialize in.

A recruiter’s knowledge of a market he/she masters runs deep . . .

Even when we are not actively facilitating a hire, recruiters have a privileged spectator position, watching how the market unfolds, and where and why employers and employees cross paths in search of the perfect match.

It struck me that I repeatedly witness underperforming candidates gaining yet another respectable job after their last 3 stints of 1 year on average. These hires are more often than not, directly hired by employers suffering from the typical strains we face over and over again in this very tense job market:

  • Internal pressure to fill the position quickly;
  • Poor skills test and reference check;
  • Lack of funds, hence reluctance to use an agency with (preferably local) market knowledge;

It goes without saying that every professional should be given a chance somewhere else in case their last role did not work out as planned. There can be multiple reasons why professional relationships may not be successful. Let’s face it, this has happened to some of our own placed candidates as well. However, I am referring especially to those candidates who keep rotating from job to job throughout their market, people who have become experts in landing jobs over and over again, despite having a very poor track record and/or poor references.  A very straightforward case of a bad hire and a very expensive one! Why?

According to a survey by www.careerbuilder.com, more than half of Companies in the Top Ten World Economies have been affected by a bad hire.

To calculate the total cost one should add, on top of the paid salary and accessory cost, the following items: missed sales opportunities, strained client relations, potential legal issues, resources (time & money), employee morale.

It is estimated to be a direct cost of on average 50,000 Euro, however if you add the rest, the cost of the damage becomes considerable. In fact according to a study by the Society for Human Resources Management (SHRM) it could cost up to five times a bad hire’s annual salary.

Employers know that, now they are taking longer to select as they want to make sure a candidate really is the best fit for the job and their company culture.

However with lack of funding, strong policies not to use additional resources (external or internal) and timelines, there is considerable pressure on the process, which sometime leads to a bad hire and the related costs.

As part of this process I strongly advise companies to rely on the expertise of a Recrutiment specialist who knows well his/her market. This person will be able to:

  • Point out quickly the top performers and the ‘don’t go to’ candidates;
  • Sell proactively the position to the right potential candidates;
  • Take on all the additional work to select, test and reference check;

True, additional funding for recruitment resources may seem expensive, however by looking at the cost of a bad hire I truly believe a good Recruiter is a substantial ROI. Any fee paid for a well matched employee is worthwhile!

To avoid a ‘bad hire’ we should always keep in mind the following:

  • Fund your recruitment campaign properly;
  • Properly evaluate candidates skills and culture fit;
  • Make a thorough reference check:
  • Use additional internal/external support whenever possible;

Moreover, we should not forget to mention the impact of a bad hire on the employee.

Yes, candidates too suffer from a wrong matchmaking which may be beyond their control. Just consider the following items:

  • Missed out commissions and bonuses;
  • Time out of work without a proper salary;
  • Potential legal issues;
  • Resources (time & money);
  • Market credibility;

All in all a bad hire has severe impact on all parties involved, therefore an employer should never neglect any tool or service that leads to a successful hire!

Written by Christian Gruppo
March 2017 – Amsterdam, The Netherlands.

CSA The Netherlands

Crown Key-Point building | Schipholweg 103 | 2316XC Leiden | Netherlands
Tel: +31 650 658 296
christian.gruppo@continental-search.com

Posted in News.