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The Cost of Poor Hiring Decisions

The hiring of the best talent is arguably the most critical and integral part of running a successful business. The decision to hire a new employee carries an element of risk and is becoming even more crucial for many companies to hire the right employee for the team.


In many cases, hiring managers will have had experiences of hiring candidates who appeared to be suitable during the interview but fell short of expectations when it came to their job performance. However, not all employees fail at an organisation due to bad performance, often it will be failures to work well with their colleagues or the inability to develop good relationships with client and/or customers. The effect of such hiring mistakes can have significant direct and indirect consequences for companies. One of the main implications of hiring an unsuitable candidate is the financial one. The longer the employee is left on the job, the higher the cost thus hiring managers will need to take into consideration the cost of the initial hire, the cost of severance as well as the cost of hiring the replacement.


So how much does it cost to go downhill?

  • It has been found that the cost of a bad hire is at least 30% of the employee’s first-year earnings.
  • A study from the National Business Research Institute found that 66% of employers experienced the negative effect of bad hires. (2012)
  • 37% said the bad hire negatively affected employee morale
  • 18% said the bad hire negatively impacted client relationships
  • 10% said the bad hire caused a decrease in sales
  • The ROI of a bad hire is -298%
  • It costs an average of £6K to replace a salaried employee, £8K to replace a mid-level employee and £32K to replace a senior executive
  • 80% of employee turnover is due to a bad hiring decision


While the financial loss is an important factor, many CFO’s tend to place the loss of morale and productivity amongst the other employees ahead of monetary losses. The increased risk of employee disengagement and often, a drop in productivity affects the quality of service, customer satisfaction levels and ultimately the revenue. This could result in uneven work distribution internally where good employees burn out due to the extra work and responsibilities inherited from their new colleague – in most cases, poor performers aren’t given critical work and so employees have to take on an extra workload. The subsequent potential reputational costs to the company is a factor that many hiring managers should not underestimate and with the growing increase of company reviews, sites like Glassdoor are often the number one place that candidates visit prior to the interview.


If a bad hire has occupied a position for a number of months and acts in a customer/client facing role, their behaviour, attitude and performance could have serious repercussions for the company and their relationship with existing and potential customers/clients. Companies will have to deal with escalations, costly compensations as well as potential legal issues – all adding to the financial burden.


It most often is the case that candidates are not interviewed or sourced properly leading to assumptions being made by hiring managers over their suitability for the role. In order to prevent future bad hires, companies need to take the time to develop a good hiring plan to ensure that they find ideal candidates:


1. Thorough screening process

It is highly imperative for companies to only progress with candidates they qualify as being well suited to the job role. For hiring managers who have a need for a highly-skilled candidate, it is important to look further than the candidate’s CV to get more insight into the candidate. Working with a recruitment agency or a talent platform that can source, qualify and connect you to the best and most suitable candidates that from your sector before they land on your competitors’ desk, not only saves you time, it also reduces your costs and ultimately gives you a better hiring experience


2. Clear job description

A complete job description with a clear and defined role, responsibilities, qualifications skill sets, experience and expertise required for the role


3. Bad hire red flags

  • A bad attitude
  • Timeliness (The candidate arriving late for the interview without providing a very good reason)
  • Fabricated information on education, skills and experience
  • Possibility of not being a good culture fit


Endorsed provides an easy solution

Having explored the costs involved with a bad hiring mistake, it makes sense to invest in making your hiring process as watertight as possible to reduce the chances of mistakes being made in the first place. This is where a direct hiring platform comes in. It allows hiring managers to look beyond the list of skills on a CV and through the assessment of the person behind it, ensuring nothing is left to chance and the right individual is selected and ultimately hired for the job. Endorsed delivers additional qualification tools such as detailed candidate profiles, the ability to chat with the candidate directly prior to the interview allowing hiring managers the opportunity to form in-depth 1st stage interviews.


Matching the right candidates to the right employers leads to significantly improved results from and improved process with the added benefit of the collaboration tool that can allow the hiring teams to share access and visibility, notes and comments of candidates thus avoiding much of the hassle and general stress that can be caused in the process of finding the best talent.


Sign up now to build your company profile and start attracting the best Endorsed talent.

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