The real cost of getting recruitment wrong

19 days ago by Nick Butler
The Real Cost Of Getting Recruitment Wrong   Blog (1)

Imagine investing in cutting-edge tech – updating hardware, installing new software, moving from a legacy system via company-wide training – only for it to fail in six months, forcing you to start again. Organisations have teams of experts making sure that the spend on digital transformation isn’t wasted and take months on the process of adopting the right technology for their business needs. Most of these companies would probably also claim that their employees are their biggest asset (and cost), so are they as diligent about their investments in recruitment?

In a 2020 survey of 6,000 hiring managers and HR professionals from the ten largest economies in the world, more than 50% said they had made bad recruitment decisions and suffered the consequences. In the UK, that number was 62%. The effects of getting recruitment wrong aren’t only financial. Those numbers are bigger than many employers would think (though according to REC, over a third of employers don’t believe there is any associated cost!), but could the non-financial price you pay be even more important?

In the UK, there are plenty of theories and guesstimates around for the monetary cost of replacing an employee who doesn’t work out and it’s far from simply another starting salary. If we take a mid-level hire, starting on £42,000 and factor in:

• Advertising and job boards

• HR workload

• Onboarding costs

• Potential loss to the company of an underperforming employee

• Training and development costs

• Recruitment consultancy costs

• Potential costs of a temp or freelancer to cover a vacant post when they leave

• Wasted time on the recruitment process

• Any extra support the poor hire may have required

It is estimated that the replacement costs for that starting salary come out at £115k. If a small company got a couple of hires wrong at that level, it could genuinely put them out of business.

But what about the effects that aren’t as black and white in terms of numbers?

• Morale – another recent survey showed that CFOs believe that the impact on company morale when a bad hire is made, is performing badly, and then leaves, can be greater than the financial costs. Poor morale spreads fast and can be seen externally by clients.

• Disengagement – a poor hire who is either struggling with the job or is a bad fit in terms of company culture is typically disengaged, and disengagement, like morale is contagious.

• Productivity – whatever the role, there is always a knock-on effect when one employee isn’t pulling their weight. It affects overall productivity, which reflects badly on more than just that person. A single bad hire can bring an entire team’s average performance down.

• Burnout – when an underperforming employee creates a shortfall in productivity, someone else typically needs to step in, resulting in good employees either feeling undervalued or resentful, or even suffering burnout as they undertake more duties. Burnout leads to stress, stress leads to absence or even resignations, compounding the original staffing issue.

• Culture and reputation – poor recruitment means high turnover, and this can affect reputation both in terms of outside perceptions negatively impacting new business opportunities as well as discouraging candidates. A decrease in reputation will change the internal culture, which can be a long road back.

Of course, recruitment consultants can get it wrong too, but the chances of a strong hire are significantly increased when a business engages the right expertise to find the right people. A consultant with sector knowledge and a high-quality network is vital, but one that can also advise on streamlining the recruitment process to improve the candidate experience will also lessen the chances of hiring the wrong candidate.

If you have suffered the effects of a bad hire, or want to re-evaluate your recruitment processes, contact us today.