Talent fuels every facet of business. A company can have the right technology, the right infrastructure, the right products and services—yet still fall short of expectations without the right people. Attracting, recruiting, hiring, and engaging the right talent for the right job is what makes your enterprise grow. In today’s climate of talent scarcity and globalization, organizations’ workforce strategies are increasingly dependent on their abilities to leverage a diverse, globally sourced workforce. The cost of a failed hire can be quite steep, not only in terms of salary and benefits, but when combined with the cost of the hiring process and formal and informal training, can easily exceed six figures per candidate.
The U.S. Department of Labor estimates that the average cost of a bad hiring decision can equal 30% of the individual’s first year potential earnings (U.S. Department of Labor, 2003). As a general rule of thumb:The higher the position within the organization (and thus higher the salary), the higher the cost of the bad hireThe longer the ill-placed person has worked at the organization, the higher the cost of the bad hire.The more training wasted on the person, the higher the cost of the bad hire.
Other hiring statistics round out the picture:
Most specific figure: It costs $7,000 to replace a salaried employee, $10,000 to replace a mid-level employee, and $40,000 to replace a senior executive (Recruiting Times).
Most general figure: Replacing supervisory, technical and management personnel can cost from 50 percent to several hundred percent of the person’s salary (Society for Human Resource Management, Recruitment and Selection Presentation, 2008).
Most recent figure: 27 percent of employers in the U.S. who reported a bad hire said that a single bad hire costs more than $50,000 (CareerBuilder survey of 6,000 hiring managers and HR professionals worldwide, 2013).
Unfortunately, bad hires are often hard to identify immediately. Bad Hires also result in a variety of other impacts on the company:
Negative impact on overall culture
Lost worker productivity
Lost time recruiting and training a replacement employee
The expense of recruiting another employee
Negative impact on morale
Employee burnout (picking-up slack)
Negative impact on client solutions
Some of the reasons an individual can be labelled a bad hire includes: failure to produce quality work, failure to work well with others, negative attitudes, attendance problems, failure to meet deadlines and causing customer complaints - to name just a few reasons.
Business is evolving: becoming faster-paced, more globally connected, and more technologically advanced. It is important to have a comprehensive talent plan that ensures you have the talent and skills you need to succeed now and into the future.
Watch this blog for advice on 'How to prevent a Bad Hire'.
Source: Fast Company, How Much a Bad Hire Will Actually Cost You?