The High Cost of a Bad Hire

In order for your company to grow and prosper in today’s competitive marketplace, you must find and retain the best talent possible. Across industries, this can be challenging and costly. But it’s important to get the hiring process right because the expense of finding skilled and productive talent in comparison to the cost of making bad hires.

When an new employee is not a good fit, it has rippling effects whether they are let go immediately or they fly under the radar for a while. When they are terminated quickly, you lose the time and money spent to recruit and train them, and incur further costs to find and onboard a replacement. Additionally, there are unanticipated costs in overtime pay or extra hours as existing staff is asked to take up the slack. When they stay, training and onboarding are likely to take longer and bad habits can creep into the work environment.

The problem of mis-hires is common and costly. In a 2017 CareerBuilder survey of more than 2,200 full-time hiring managers and HR professionals, 74 percent reported they made bad hires. And companies said they lost an average of $14,900 per bad hire in the previous year. And, the U.S. Department of Labor estimates the average cost of a bad hire is 30% of the employee’s potential income the first year. Other sources put this cost estimate much higher, particularly for higher level positions.

But while these estimates illustrate how much an underperforming employee can disrupt your business, the true cost of a bad hire goes well beyond dollars and cents.

An unproductive employee who is not pulling their weight—whether they don’t have the required skills or are disengaged—can lower morale and productivity, and foment dissatisfaction among fellow employees. A poorly performing employee can jeopardize mission-critical work and put added pressure on coworkers to compensate, which can lead to burnout.  Disengagement is contagious and can have a cascading effect, resulting in turnover of productive staff members.

A mis-hire can also cause fellow employees to question management’s leadership ability, which may lead to a breakdown in critical communications and undermine authority. New hires that are a bad fit can be particularly devastating for a small business or startup because their shortfalls impact the entire organization.

Bad employees have additional enduring negative consequences for a business:

  • They can alienate customers who may take their business elsewhere.
  • They can diminish your company’s brand.
  • Their actions may result in expensive, onerous litigation.

How to Avoid Mis-hires and Retain Good Ones

Establish a Thorough Vetting and Interview Process


Given the high stakes described above, you don’t don’t want to waste time and resources recruiting, interviewing, and making job offers to the wrong people. Your company should have established standards for vetting potential talent and conducting interviews to which hiring managers must adhere.

In fact, a 2015 Glassdoor talent acquisition study revealed that companies lacking a standardized interviewing process are five times more likely to make a bad hire than those that do.

Here are some strategies to help you ferret out the best possible employees:

  • Create a consistent process for all candidates being considered for a specific job, including a careful reference check and a skills/aptitude test, if applicable.
  • Interviews should be scheduled with key team members in addition to the team leader. Each interviewer should be trained what to look for in terms of functional ability, personality, and cultural fit, as well as any possible red flags.
  • Interviewers should be encouraged to trust their instincts and speak up if something doesn’t seem right. When in doubt, It might be helpful to bring in an outsider from the department for a fresh perspective.

Establish a Solid Onboarding Process

Even a good hire can go off track when they don’t feel welcome and confident in their new job. They must be oriented properly with adequate resources and training to ensure their success. Make sure new employees are introduced to key staff or team members, and encourage them to ask for help when they need it, rather than try to shoulder through on their own. Make their transitions smoother by setting up their workspace, phone, and providing all necessary equipment and programs. Thoroughly train them to use key equipment and safety gear. It’s also helpful to introduce them to supervisors and employees within other departments they will likely work with

Institute an Employment Probation Period

A good way to determine whether a potential employee will be a good fit in your organization is to give them a 30-, 60-, or 90- day trial run. This is an opportunity to get a good measure of the employee’s capabilities and ability to work well with others. Keep in mind, however, that a trial employment period may not be practical for small companies or certain types of specialized positions.

Monitor Your New Employee’s Performance

It’s critical to establish and communicate clear expectations for new employees. Set up regular meetings with the team leader and the new hire to discuss how they’re acclimating to the job. If there seems to be a problem, try to pinpoint exactly what it is; communicate the problem to the employee and set up a program for addressing it. If the employee doesn’t adapt, don’t hesitate to let them go; it will be better for everyone

Take Stock of Your Company Culture and Employee Expectations

If you have a problem with high employee turnover, in spite of your best efforts to recruit, hire, and properly onboard the best people, it’s time to take a close look at your company culture and determine if there’s a disconnect between employee expectations and reality.

In fact, nearly one in ten respondents to a recent CareerBuilder survey said a new hire didn’t work out because the company did not properly communicate its employer brand or culture.

Take a fresh look at your website, social media, as well as marketing and recruiting materials. Ensure your external communications accurately represent your true mission and how your company actually operates. If, for example, your company culture is loose and free-wheeling, you may want to focus on hiring self-starters who don’t require a lot of structure and supervision

Hiring the right talent is critical to your company’s mission but can be one of its biggest challenges. But hiring the wrong employee is not only expensive, it’s also potentially harmful to your business in the long-run. If you don’t have the internal staff and resources to properly vet new employees, a professional staffing solutions firm with a robust candidate assessment process can help.