The Costs of Hiring the Wrong Employee

The dilemma of hiring the wrong employee

Unfortunately, the effects of our time-poor society translate into the business world even more than our personal lives. Often times, employers and companies seeking top-level candidates can end up hiring the complete opposite of what they are looking for. Employers fall into the trap of hiring the wrong employees due to needing to fill the position quickly, not researching the candidate’s skills thoroughly, and failing to perform adequate reference and background checks.

According to Fast Company, companies like Zappos recognized the growing dilemma of hiring wrong employees and responded by creating some innovative policies in 2014 to combat the effects of wrong hires. In fact, the CEO of Zappos, Tony Hsieh abandoned the old corporate hiring structure and offered new hires a $2,000 bonus to leave the company within the first week if they were not working out. Zappos recognized the need to have the right employees for their corporate culture. Tony Hsieh even went as far as to say his past bad hires costed the company “well over 100 million”.

Still not convinced? Check out some further statistics concerning wrong employee hires:

• Out of more than 6,000 hiring professionals worldwide, more than half said they have felt the effects of hiring someone who turned out to be a poor fit for the job or who did not perform it well.
• Twenty-seven percent of the U.S. employers surveyed said that just one of these bad hires cost their company more than $50,000.
• According to a study by the Society for Human Resources Management (SHRM), hiring the wrong person could cost up to five times a bad hire’s annual salary.
• SHRM also found that the higher the person’s position and the longer they remain in that position, the more it will cost to replace him or her.

Financial Costs

Hiring the wrong employee leads to many financial burdens. Some financial costs associated with hiring the wrong employee include: interview expenses, training and orientation costs, termination costs, unemployment and potential litigation costs if the employee attempts to sue for wrongful dismissal, and repeating the entire hiring process which requires even more time and money.

Productivity Costs

The more time and effort that is put into managing poor hires equates to a loss in productivity overall for the business. A loss in productivity can lead to fewer sales and even lower customer-satisfaction.

Employee Morale Costs

The effects of a bad hire transcend the mere financial and productivity costs and can affect the whole team. Effects of a bad hire are felt by all team members because it puts more strain on their responsibilities when there is a weak link in the company. According to Entrepreneur.com they shared, “Ninety-five percent of financial executives surveyed said that making a bad hire at least somewhat effects the morale of the team, and 35 percent said a poor hire greatly influences employee morale.”.

How can we help?

The Orsus Group recognizes and understands the importance of making the right hiring decisions. Wrong hiring decisions can be costly not only financially to companies, but also cost them in productivity and employee morale. One of the strongest ways to ensure hiring the right employees is to have accurate and timely background checks, create clearly defined hiring objectives, and develop an attractive workplace culture.