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The Cost Of Getting Recruitment Wrong

over 4 years ago by Christian Pampellonne
Bad Hire

In times of a talent shortage, when unemployment figures are low and new jobs are being created, it’s tempting to make quicker decisions than normal when hiring, purely because you have to rather than because you’ve found the right individual. You may strike lucky, of course, but if you don’t, the financial implications can be huge.

As an employer, you may think that you’ve only got it wrong on occasion and that it hasn’t really cost you, so there’s no need to do anything differently in the long term. Sadly, it’s not a rare occurrence – a recent survey of HR managers showed that 85% believed that a company they had worked for had at some point made a bad hire. Other surveys suggest that at least 20% of all hires and 40% of new hires within their first 18 months can be classed as bad hires. It happens frequently and businesses clearly aren’t aware of the financial impact enough to change their recruitment processes.

What is a bad hire?

It would be easy if there were a clear set of criteria to meet, but it’s a slightly subjective, grey area. Obviously, length of term is a simple one and a hire that is no longer in the position after a short period of time (whether by resigning or by a decision from the employer) is a failure. But there are a number of other factors to consider, which are easier to clarify when you compare them to a successful hire using internal KPIs or review systems:

  • Their impact on and contribution to the team
  • Their productivity and performance
  • The cultural fit
  • The skill set
  • 360 feedback from peers
  • Their attitude and professionalism

Why do we make bad hires?

Other than hiring under pressure and against the clock as we mentioned above, there are many other reasons that companies make decisions that lead to a poor hire, including:

  • Inadequate strategy review or communication with the rest of the business
  • Poor reference, qualification or skills checking
  • Unconscious bias and hiring like-for-like
  • Poor job description and advertising attracting the wrong candidates
  • Weak in-house skills and experience when interviewing
  • Insufficient on-boarding and integration

What is the true cost of an unsuccessful hire?

It’s not just time wasted or recruitment fees that comprise the true cost (and despite these, many employers don’t consider that it has cost anything). There are training costs and any loss of productivity to consider, potential termination costs, as well as non-quantifiable detrimental effects on morale, brand reputation and turnover of other staff.

PWC estimate that the total cost can be anything from 50% to 150% of the annual salary in question, whereas REC estimate the cost of poor middle manager hires could be as much as three times the salary, but more importantly a major liability to the future success of the business.  

 

At The Consultancy Group we firmly believe that business must have stringent recruitment processes and should not deviate from them. We have seen plenty of employers move too fast or cut corners, only to start the recruitment process again later. A trusted recruitment partner will understand the hiring side’s needs, culture and opportunities as well as the candidate’s skills, ambitions and history. Taking the time to get it right is crucial to secure the right talent who can make a positive impact on your business.