The Hidden Costs of a Bad Hire

The labor market is beginning to look promising after a tumultuous year with the Covid pandemic. Consider this quote from the NY Post.

American employers went on a stronger-than-expected hiring spree in February as a sharp drop in coronavirus infections and rising vaccinations loosened the pandemic’s grip on the labor market.

The US economy added 379,000 jobs last month, beating economists’ estimates for a gain of 171,000 on the heels of January’s addition of 166,000, more than triple the number previously reported.

The unemployment rate, meanwhile, edged down to 6.2 percent, its lowest level since the start of the COVID-19 crisis last March but still well above the 50-year low of 3.5 percent reached a year ago, the Bureau of Labor Statistics said Friday.

The closely watched report suggests the job market is in for a big springtime bloom as businesses emerge from the wave of coronavirus lockdowns that hampered growth in the winter, experts said.

Hopefully, their prediction will ring true and millions of Americans will find work, businesses will flourish and the economy will once again prosper. In this scenario however, there is a possible impediment to businesses growth – bad hiring. In their zeal to get “butts in seats” many recruiters and hiring managers for that matter, overlook the long term consequences of hiring the wrong person. What follows is a list of considerations that should weigh into every hiring decision.

A bad hire could…

• …have a negative impact on client relations.
• …cause a decrease in sales and as a result…
• …affect employee morale, sparking an exodus of talent from your company.

The cost of a bad hire can be identified in several ways; from performance to behavior-related issues. Among the effects of hiring unqualified employees include:

• Consistent failure to meet deadlines which has a cascading effect on other people’s work. 
•  A negative personality making it challenging for people to work with them. 
• Chronic absenteeism and not fully engaged when working.
• Negative client interactions

Although the consequences of hiring the wrong person are evident, the practice still continues. Why? There are several reasons for this.

• A position has been unfilled for too long and internal pressures make hiring for that position an imperative.
• The hire was unqualified for the role but somehow managed to convince the hiring manager otherwise 
• The employer did not check references or do a background check.
•  An understaffed recruiting department was more focused on reducing time to fill than quality candidates.

All that being said, in the event of a bad hire, I suggest the following next steps.

• Have “the talk” and explain why you feel their work performance is sub par. Ideally, they will see the error in their ways and the working relationship can be salvaged and improved. This is the preferred outcome as there is a price to pay for attrition. According to the Center for American Progress, the average cost of replacing someone earning $30,000 was 16% of annual salary. For positions that earn between $30,000 and $50,000 per year, the cost of replacement was found to be 20% of annual salary. For executives earning high salaries, the cost of replacement was found to be 213% of annual salary. 
• If the working relationship cannot be saved and the bad hire has to go, look for ways to give them a graceful exit. Perhaps offering severance, gradually reducing their hours or switching their status from permanent to contractor can help ease them out the door while simultaneously reducing potential damage. It may also allow them time to secure work elsewhere and by doing that, maybe nullify the chance of negative comments on social media.

Bad hiring is painful for the company and for the worker, as it mars their career growth. It puts both parties in an unpleasant situation. The best way to circumvent the possibility is to optimize your recruitment process, augment your recruiting team when necessary and minimize the damage of disgruntled ex-employees with clever employer branding. It has been said that an ounce of prevention is worth a pound of cure. This is especially true in recruiting.