The cost of a bad hire in Human Resources
by Umesh Khandke
The real cost of a bad hire
Of course, there’s the basic salary along with the costs of sourcing new talent to replace your bad hire, but what about the costs we don’t always think about? According to recruitment technology specialists SAP, 10% of employers say a single bad hire costs 25k while 25% said it cost them 50k or more. In fact, replacing a bad hire can cost as much as 3x the individuals salary. So, it’s more than just the basic salary, where are these other costs coming from?
What a bad hire can cost
- 85 per cent of HR decision-makers admit their organisation has made a bad hire, and a third (33 per cent) believe that these mistakes cost their business nothing
- a poor hire at mid-manager level with a salary of £42,000 can cost a business more than £132,000
- the hidden costs involved in bad recruitment include money wasted on training, lost productivity, and increased staff turnover
- four in ten employers (39 per cent) admit that the interviewing and assessment skills of their staff should be improved.
Sourcing costs
What you paid to find them including all your job board and paid social costs, and of course the time of your recruitment team that you pay for in the form of their own salary.
Training costs
Anything you invested in their training, whether it was paying for any required certifications or any other qualifications you may have paid for.
Incentives, benefits and severance
Beyond the basic salary you may have also paid out for employee benefits and incentives during their employment, as well as any severance payment.
Business costs
This is one of the hardest to track and easiest to miss but undoubtedly one of the most important costs a bad hire can have. If they weren’t up to scratch then unproductive and poor-quality work may cost you leads, sales and custom satisfaction.
Plus, the ripple effect as your other employees and the rest of the team or department suffer. Being forced to shoulder the extra work load of a vacant position or handholding a poor hire through their rocky employment can have a negative impact on morale and productivity.
Reducing costs of a bad hire
How do you reduce the costs of a bad hire? You stop hiring badly. The whole recruitment process can affect whether you get a good or bad hire, and that will affect how much you end up paying to fill the position.
Sourcing your good hire
It’s cheaper and more effective to use resources you’re already paying for. You can control sourcing costs by encouraging and using employee referrals, including utilising alumni employees who have left under good terms. These employees are also more likely to bring in similar candidates that already fit well into the culture, helping to ensure quality hires.
How to manage a better referral program:
- Communication – tell employees about the current open positions and make sure there are multiple communication channels available to make it easy for them to forward on job opportunities to contacts via email, phone and more.
- Make sure the program is funded and managed well – reward employees for their risk in referring a friend and make sure the candidate process is a good experience. Employees won’t refer their friends if they think they’re in for a tedious or tough process.
- Communicate your culture – make sure that the brand culture and values are continuously and consistently communicated to employees. If everyone has a clear idea of the culture, then they’ll have a clear idea of what friends might be a right fit. If they aren’t sure or are confused about the culture they will be confused about who, if anyone, to refer.
The right skills for the job
Source and hire talent that has the right skills for the job. Advanced recruitment tools like SAP SuccessFactors can now use machine learning to better match job descriptions to candidate profiles for efficiency. This type of human resource management software can also provide a single platform to access and manage all your recruitment channels. With holistic and integrated management of all your social networks, job boards and corporate careers sites, you can create and execute a strategy that targets the right talent at the right time.
The interview process
It’s important to have a good hiring experience to keep the top talent interested. A lengthy, tedious or just poor hiring process can frighten the best candidates away and into the arms of your competitors. Look at your current process to see if there are areas where you can make the experience more efficient and engaging, whether it’s reducing the amount of admin at the start or having higher up leaders take part in crucial interview stages to. From start to finish, make sure you find ways to communicate brand culture and help weed out any candidates that won’t be the right fit.
Onboarding and training
Again, you’ll need a good experience to keep those best hires engaged and happy. Ensure that all the relevant training and support is available and easily accessible to nurture talent and get people suited to the role as quickly as possible. Here’s some of our top tips for a providing the best possible employee experience:
- Tech and tools – give your employees the tools they need to be as productive and supportive as possible, for example providing a platform where they can access training videos, online tests and certifications to help them settle into their new role as quickly as possible.
- Personalisation – with many of todays advanced HRMS offering superior analytics and functionality, it’s now possible to personalise the experience to employees. Provide tech and tools in the format they prefer, whether it’s online or even via mobile.
- Communication – break down the walls between leadership and employees so they can access to support and collaboration when they need it. By making leaders available online and making meetings easy to schedule, your new hires will feel they are being listened to and can begin making a productive impact as soon as possible.
- Employee relationships – provide forums and internal social networks for employees to share and collaborate, whether it’s project based or just for fun. Creating this team spirit and collective culture will be what keeps your new talent happy.
Measure employee experience
Finally, don’t forget to measure your employee experience and recruitment process so can continue to make changes for success. Failure to develop metrics to monitor experience performance can negatively impact ability to attract and hire top talent. Measuring the ROI of the experience can include:
- Cost per hire
- Time to fill
- Time to productivity
- Candidate satisfaction rates
- Measuring employee’s willingness to recommend the business
- Analyse the gap between internal and external perception of the business
If you want to find out more about reducing costly bad hires or want more information about SAP SuccessFactors, contact one of our team today.