How Much Does a Bad Hiring Decision Cost

How Much Does a Bad Hiring Decision Cost?

Making a bad hiring decision is the stuff of nightmares for every business.

Yet, it’s a risk we all have to taken when we need additional resource.

Bad hiring decisions can lead to several bad outcomes.

For instance, your business’ productivity could take a hit, leaving your profits in the balance.

It could even upset the apple cart among current employees, forcing them to hand in their notice.

But the question is; how can you attach a quantifiable figure next to a bad hiring decision?

Is there a specific way to work out how much a bad hiring decision costs?

To shed some light on the matter, here are a few handy pointers for you to consider.

The formula for working out how much a bad hiring decision costs

According to Oxford Economics and Unum, the average cost of employing the wrong professional is £30,165.

While the Recruitment & Employment Confederation (REC) believes a poor mid-manager level with a salary of £42,000 would cost you somewhere in the region of £132,000!

Talk about a fatal mistake!

But how did they arrive at these figures?

Well, the important thing to remember when calculating how much a bad hiring decision costs is to think about the hidden costs and not just the initial recruitment spend.

For example, you must weigh up what the cost per hire was.

This includes the budget used for advertising the new role, HR time processing the new starter, any recruitment agency fees and the time management spend interviewing.

What’s next?

The next stage is to break down the days lost through processing, training and interviewing.

Can you identify any dips in productivity across the wider business?

If it’s a certain amount of sales or prospects phoned in a day, how much is each one worth? From a more literal view, how much is the employee affected earn every day?

Over time, try monitoring the work the bad hire completed.

What’s the average amount of work, sales, daily duties etc. they should be completing every day?

Use this to compare their performance against it.

You can then put this into a figure and add it to all of the recruitment costs.

Making a bad hiring decision can lead to poor team morale as well.

During their time with you, did more employees leave the business?

Did the team productivity as a whole dip? Were there more absences or did standards of work drop?

Stress on employees

You must think about levels of stress too.

A poor employee who can’t keep up with their work will result in someone else trying to pick up their workload. With this in mind, did this create a stressful environment? If possible, find out whether a toxic environment lead to more absences, a drop in productivity or a bad standard of work.

Doing a deeper dive into the ins and outs of internal affairs based on a bad hiring decision will enable you to come up with a more conclusive cost.

How to avoid making a bad hiring cost

One of the most important steps towards avoiding making a bad hiring decision is to build an effective job advert.

The moment you cut corners or make a hash of the very thing that attracts candidates to the role, you’re increasing the odds of making a bad hiring decision.

In your job advert, you need to include:

  • A salary bracket
  • Keywords/searchable terms
  • A brief company bio
  • A summary of responsibilities in bullet point form
  • Benefits/perks

You can read more about this, plus extra tips on what to include and the length of content required in our previous blog on how to build a perfect job advert.

Once you have an influx of applications, how are you shortlisting them?

Are you spending ages reading the first dozen CVs and simply glancing over others when you get tired?

To ensure you don’t miss any hidden gems, you should write down certain keywords, skills and experience you’re looking for.

Using this information, you can then use keyboard shortcuts to see whether the candidate has included any of them in their CV.

While it’s important to still take a quick browse, generally speaking, if you can’t find any of these terms in their CV, it usually means they aren’t a right fit for the job.

Avoiding bad hiring decisions also requires an excellent job interview process. Are you asking the right questions?

Have you got more than one professional assessing a candidate?

Are you forgetting to look out for negative body language signs?

It’s worth involving colleagues in the process too by getting a few of them to do ‘guided tours’ around the business.

This way, they can get to know the candidates on a slightly less informal level which you couldn’t do in a pressured interview environment.

Play it safe

All-in-all, there are a lot of things that can go wrong during the assessment part of recruiting, so it pays to call in the experts.

At AdBuilder, our platform is designed to help you create effective job adverts that only attract top candidates.

Investing in this initial stage of attracting candidates will take the pressure off the interviews and enable you to make more informed decisions which won’t cost you an arm and a leg!

To find out more, visit adbuilder.io.

Or for more tips on attracting candidates, check out our recruitment blog.

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James Ball
Written by James Ball

James is the founder and owner of AdBuilder and a recruitment expert from Sutton Coldfield in the UK.  He regularly advises companies on how to improve and get the maximum ROI from their recruitment processes and advertising.

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