You've spent months drafting job descriptions, posting “We’re hiring!” ads across numerous job boards, social networks and internally, encouraging current staff to make referrals. You've sifted through countless resumes, evaluated hard/soft skills and conducted phone interviews, bringing a select few onsite for a face-to-face. You've looked into candidates’ professional histories, verified references and perhaps even scoured social networks such as Facebook, Twitter and LinkedIn to ensure their behaviour was conducive to company culture and the employee value proposition.
You made an offer, explained benefits and hoped the answer would meet your expectations…“I accept.”
The new-hire workspace has been prepared; you have orientation mapped out. The first day, a simple tour, introductions and reminder that coffee from the kitchen is always free. Training will last several weeks, but this is chicken feed/peanuts/chump change compared to the financial and operational benefits soon to be realized. An air of excitement fills the halls, because you believe you have found your purple squirrel.
Three-six-nine months later, this employee is gone. Fired. Cultural fit was a mess; productivity in the negative. Your team is demoralized, sad to see someone go who brought effort but was ultimately a bust; frustrated to again have the position open, and thus working overtime to complete daily tasks. Worst of all, your consumers and customer base took a dip. Perhaps he/she misrepresented their resume; perhaps they simply couldn’t handle the deadline-driven environment and folded under pressure.
Whatever the cause, you’re back to square one—thousands of dollars of investment, time and preparation gone, and the chair to an important position open once again. The process starts over.
Without further ado, Talent Acquisition Fast Facts on the substantive, long-lasting effects of poor hires:
According to the U.S. Department of Labor, the average bottom line cost of a “bad hiring decision” equals approximately 30% of the individual’s first-year earnings potential.
- For a professional salaried at $45,000, the result is potentially a $13,500 loss for the employer (cost of replacing employee).
According to the Harvard Business Review, 80% of employee turnover is the result of bad hiring decisions—resulting in the need for new workers and, in turn, training and development costs.
- According to the American Society for Training & Development, more than $164 billion was spent by U.S. organizations on employee training in 2012 (61% of which was spent internally), an increase of $38 billion from 2009.
According to a survey conducted by CareerBuilder and Mindflash, 41% of responding organizations said a bad hire in the past year has cost them at least $25,000; 25% of responding organizations report an impact of at least $50,000 as a result of a poor hire.
According to a study conducted by Link Humans and reported by UndercoverRecruiter, a second-level manager (employed at an organization of any size) who earns $62,000 per year and has been terminated after 2.5 years, the bottom line costs to a company over these 30 months are $840,000; this includes:
- Hiring costs
- Total compensation
- Cost of maintaining employee
- Disruption costs
- Mistakes, failures and missed business opportunities
Leaders intuitively know the consequences of poor hiring decisions go far beyond strictly financial ramifications; responding organizations from the aforementioned CareerBuilder and Mindflash report indicated being significantly impacted in the following ways:
- Lost worker productivity (41% of respondents reported this consequence)
- Lost time due to recruiting and training another worker (40%)
- Expense recruiting and training another worker (37%)
- Negative impact on employee morale (36)%
- Negative impact on client solutions (22%)
Additionally, leadership at these organizations reported poor hires most prominently displayed the following characteristics:
- Failure to produce the proper quality of work (63% of respondents reported this as a major issue)
- Failure to work well with other employees (63%)
- Negative attitudes (62%)
- Immediate problems with attendance (56%)
- Employee caused customer complaints (49%)
- Failure to meet deadlines (48%)
Are there strategies than can help companies better protect against bad hiring decisions—such as more defined job descriptions and skill sets, in-depth reference reviews or conducting personality tests? Is it possible to uncover a poor hire immediately, or is time required to be sure? For rapidly growing organizations in need of quality talent ASAP, what’s the solution?
We’d love to hear your thoughts on these and other related issues below!