Racking up costs: Why it painful to hire the wrong person
As the economy continues to regain its stride, business seems to be moving at a million miles an hour. When it comes to your recruitment process, however, it’s worth shifting down a few gears. Whether your business is coming out of hibernation or a rough period of redundancies, when you’re finally ready to take on new employees again, it’s important to be equipped with the tools to make the right decision. Otherwise, it will cost you.
The obvious monetary costs
The most obvious pitfall of hiring the wrong person is the straight up financial cost. A recent study revealed that employers can lose between 30 to 150 per cent of an employee’s salary on a bad hiring decision. The costs start racking up at the beginning of the recruitment process and can continue as far as six months into employment, as it can often take several months of training before a new employee becomes effective.
Onboarding is a costly process in itself, but it’s an essential investment for employees that go the distance. In the case of a bad hire, however, it’s simply a drain on resources – one which impacts various individuals at every touch point of the recruitment process, from HR and the executive leadership team, right down to the co-workers and direct reports.
When weighing up the monetary costs of a bad hiring decision, you also need to factor in any termination costs which will vary from contract to contract.
Once you’ve finally decided to cut your losses, you need to start the entire process over again from scratch. More time and more money.
The opportunity cost
Slightly more difficult to measure, though just as taxing, is the opportunity cost – the business you may have lost as a result of taking on the wrong person. On top of that, there’s the time and resources required from other staff members to help the new employee get up to speed.
When a team or individual is supporting a new employee (or simply picking up the slack), what results is a loss of productivity. If an employee is being shadowed by a new recruit, it often takes twice as long to work through certain tasks. In a sales-based role, it’s easy to measure the lost revenue that may result. In a service-based role, the distraction of training a new team member may lead to missed deadlines, reduced performance and poor customer experience.
In most cases, everyone is willing to sacrifice a bit of productivity to onboard a new employee in the hope that it will make the team more effective in the long run. When it becomes apparent that their time and patience has been misplaced, however, it’s totally demoralising and can lead to consequences far more damaging than any financial burden.
The intangibles
Making a bad hiring decision, particularly on more than one occasion, can disrupt company culture dramatically. Any momentum that a team or business has developed can be brought to a halt in an instant. Unfortunately, if these poor hiring decisions become a regular occurrence, trust in the company and the executive management team can erode over time. It makes established staff members question what management is actually looking for and can lead to losing great talent through the process.
It appears to impact smaller teams a little more heavily as a result of working closely with a handful of individuals, but even in larger enterprises, employees who have developed a one-to-one relationship with the dud hire can be thrown off their game.
High staff turnover can also have an impact on how the company is perceived across the industry.
How do you know when to let someone go?
The truth is, the sooner you cut your losses the better. Employers tend to hang on longer than they should, because they’ve already invested so much. It’s not uncommon for managers to hold on for two or more months in the hope that things will turn around.
That’s why it’s so important to implement a robust, well-rounded hiring process. This goes beyond making sure that the candidate ticks all the boxes on paper. The two crucial elements of making effective hiring decisions are interviews and reference checks. The latter allows an employer to not only fact check the candidate’s credentials with a previous manager, but it opens the conversation for questions like “How can I support and get the most out of this person?”
Why reference checking solutions are vital
If you’ve ever had to provide a reference for someone, you know how time consuming it can be. The traditional method involves talking on the phone for upwards of half an hour to discuss the candidate in question, but who has time for that these days?
A reference checking solution like Referoo allows referees to conduct these checks at a time that suits them, giving them the time to provide a detailed, quality reference. Referees offer valuable knowledge and insight, so having a tool that makes the process as easy as possible for everyone just makes sense.
With Referoo, a reference check can be completed in less than a day, which means you’ve already saved time and money on the recruitment process. And with the invaluable information provided by the referees, you’re already on track to making a great hiring decision.