The Great Resignation, a term coined to describe the massive wave of resignations that was witnessed across various industries during the pandemic, has highlighted the importance of hiring the right candidates. With the ongoing labor shortage, companies cannot afford to make mistakes in their hiring decisions.
Mis-hiring, the act of hiring the wrong person for a job, can be a costly mistake that could negatively impact a company's productivity, revenue, and culture.
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.
On the other hand, Harvard Business Review has found that 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.
However, this is just the tip of the iceberg. The real cost of mis-hire includes the time and resources spent on recruiting, training, and on-boarding a new employee, as well as the potential loss of productivity and revenue.
Training & Employee Development
Recruiting costs can add up quickly, and they are often overlooked when calculating the cost of mis-hire. This includes the time spent posting job ads, screening resumes, interviewing candidates, and conducting background checks. The cost of these activities can range from a few thousand dollars to tens of thousand dollars, depending your use of an outside headhunter, the importance or seniority of the role, and internal cost of labor involved in screening and interviewing talent.
Training and on-boarding costs can also be significant, especially for specialized roles that require specific skills or knowledge. The cost of training includes the time and resources spent on providing orientation, job-specific training, and ongoing development.
Sometimes the hidden cost of loss of productivity can also be significant. A mis-hire can lead to a decrease in productivity due to the time spent on correcting mistakes and re-training the new employee.
Affecting the Company’s Culture
Additionally, hiring a toxic employee has an impact on the morale and motivation of other employees, leading to a decrease in productivity and an increase in turnover. The loss of revenue can be even more significant, as a mis-hire can result in lost sales or decreased customer satisfaction, leading to a negative impact on a company's bottom line.
This situation can also extend to the company's culture: disrupting the team dynamics and leading to tension and conflict as well as negatively impacting the company's reputation, especially if the employee has direct contact with customers or clients. This can lead to a loss of trust and confidence in the company's ability to provide quality products or services which is common for companies with high rates of employee turnover.
In conclusion, mis-hire can be a costly mistake, especially during The Great Resignation. Companies cannot afford to make mistakes in their hiring decisions, as the cost of mis-hire may be more expensive than trying other solutions, such as outsourcing this service through a Recruiting firm.
It is crucial for companies to invest in effective hiring strategies, including thorough screening and assessment processes, to ensure they are hiring the right candidates for the job.