What is the cost of the wrong hire?
Research shows that for SMBs, one of the biggest threats to success is actually internal,
What’s do you believe is the biggest threat to your business’ success? Is it the economy? Competitors? New emerging technologies?
What if the biggest threat to your business isn’t one of the things listed above— what if it’s something that’s within your control? What if it was something you could potentially avoid if you knew what to look out for?
Research shows that for SMBs, one of the biggest threats to success is actually internal: Making bad hiring decisions.
Every business owner knows that making a bad hire can end up costing their company big time. But just how big?
While financial losses are quantifiable, the cost of hiring the wrong person for a position goes far beyond numbers.
Let’s look at the full picture on how much the wrong hire can cost your company. And more importantly, ways to avoid making them!
What Factors Influence Bad Hiring Decisions?
Before we look at how much bad hiring decisions can cost your company, let’s try to understand why they happen in the first place.
First of all, if your SMB has made some bad hiring decisions in the past, you’re far from alone. In fact, 74% of business owners have admitted to hiring the wrong person for a position.
So what's the cause?
There are several reasons companies may make a faulty hiring decision:
The candidate may lie or exaggerate their qualifications for a position
There’s pressure to fill a role too quickly
The company is having difficulty finding qualified candidates or lacking the tools to do so
The role a company is hiring for is confusing or complicated
Companies don’t want to spend the time or money on reference checks or background checks
Unfortunately, the list above ends up costing companies thousands of dollars each year in lost time and lost revenue:
With competition for talent rising globally, recruitment costs for employers are skyrocketing. Between writing new job descriptions, posting them on job boards, reviewing resumes, and conducting interviews, recruitment eats up quite a bit of time— and in any business, time is money!
A study by the Society of Human Resource Management showed that the current amount of money spent on recruiting a new employee is $4K and the process takes around 42 days. But in addition to that, you also have to factor in lost productivity during that time frame.
Once you’ve invested money in recruitment and decide to make a hire, the liabilities, unfortunately, only continue to add up.
For the average small to medium-sized business on-boarding 100 new employees each year, on-boarding can cost upwards of $40,000 per year (or $400 per employee.) That’s not including the cost of recruitment mentioned above. That also does not include any special training or equipment for your new employees.
Damage to Company Culture
Low employee morale and lost productivity (or opportunities) are two of the largest hidden costs associated with bringing on a bad hire. If the person you’ve hired is not a great fit for your culture, they likely will cause some division or become isolated. Or worse, if they are in a position of power, they can disrupt the culture all-together.
Unfortunately, even if the bad fit leaves your company, the repercussions of this bad hiring decision can echo far beyond their last day. Poor performers can actually lower the bar of productivity for your team as a whole, and disengagement can become the new norm.
Burnout for your best people
When someone leaves a company, extra work and responsibility is usually thrown upon other members of the team in order to make up for the slack. And unfortunately, usually the people most willing to step in and pick up that slack are your best workers.
However, if the trend of bad hires continues, or a company can’t perfect their processes in order to hire the right people faster, it can lead to burnout for your best employees. Not to mention, the constant turnover in talent can lead to an unstable culture, weak workplace bonds and a loss of trust.
How to Avoid Making Bad Hiring Decisions with a Trial Hire
It’s clear to see that making a bad hiring decision is not only insanely expensive, but can be very damaging to your business as a whole.
However, there is a way to avoid making poor hiring decisions—and it may be easier than you think!
Trial hires help companies and employees find out if a new position is a mutually good fit before making a commitment. This has three main benefits:
It makes the hiring process much more efficient by testing a candidates real on-the-job knowledge
Resumes can only tell hiring managers surface level facts about a candidate. Interviews may give you a better idea of a person’s character, but they don’t show what that person is like from day-to-day. Trial hires help to solve this issue by inserting candidates into the job and testing their skills, abilities, and talents.
Stops companies from investing too much time and money in the wrong hire
The best way to truly tell if someone is a good fit or a bad fit for a new position is to let them try it!
Trial-Hiring can save companies from having to go through an entire recruiting, hiring and on-boarding process only to find out they’ve chosen the wrong candidate. This not only saves time, money and effort, but a lot of headache as well!
Gives new employees an easy out if the position is not a good fit
Trial-Hiring is great for companies, yes, but they’re also great for candidates! Employment has to be a mutually good fit in order to be successful. When a candidate gets to try a position before they decide to commit, it helps them to do so more confidently. It also helps avoid an awkward conversation a few months down the road if the employee feels the position is not right for them.
However you slice it, trial-hires are a win-win for today’s modern businesses who are focused on both efficiency and a happy, healthy company culture.