The financial impact of making a wrong hiring decision is quantifiable but when calculated in terms of productivity and morale, it turns out to be an exceptionally high price to pay. When one bad apple fails to pull its weight, it takes a toll on your high-performers who are forced to share the burden. According to the U.S. Department of Labor, the price of onboarding a single wrong hire amounts to 30% of his first year’s earnings which is enough to put the profits of small business at stake.
The Top 10 Cost of Wrong Hiring Decisions
Loss on the Business Front
Loss of Productivity
A new hire whose performance can be placed in the bottom quarter is actually producing anywhere between 25% to 500% less work as compared to a high performer and the chances are high that the quality of work may be even lower than the volume of work.
Loss of Revenue
If the new hire is placed in a department that has a direct impact on the bottom line like sales, his/her inability to generate leads can have a huge impact on the revenue down the line.
Reduced Customer Satisfaction
Customer satisfaction is critical to surviving competition and staying successful but when a bad hire is assigned a customer service role, he/she can significantly reduce customer satisfaction and increase the customer attrition rate.
Managing and Maintaining a Weak Hire Takes up More Time and Effort
Weak hires are poor performers who make a lot of errors and are accident prone which makes them high maintenance. They require more training and take up more management time which could otherwise be invested on more important areas like product development.
Cost of Terminating a Weak Hire
A weak hire sounds like a quick fix that may help in the short term but eventually, the poor performance needs to be replaced when it can no longer be tolerated. Bad hires need frequent performance management which can take up a significant chunk of the development resources and they too are eventually lost.
Loss on the Professional Front
Loss of Credibility as a Hiring Manager
It is widely known that only weak managers make wrong hiring decisions and bring “C Players” onboard. Hiring weak candidates consistently sends out a very clear message to everyone in the organization. Once a manager is branded as a “C” hiring manager, he/she loses all the trust and respect of colleagues, negatively impacting their willingness to support, share tips, and cooperate.
Loss of Competitive Advantage
Every wrong hire means a missed opportunity to become an HR leader with bench strength. If the attrition rate of your organization is high, you may be facing the risk of a long-tenured wrong hire turning into a team leader. This will eventually reduce the candidate promotion pool dramatically, increasing the turnover rate and reducing internal transfers.
Monetary Loss
With every single slot that is filled making a wrong hiring decision, you can expect absenteeism and tardiness to go a notch up and your performance bonus to reduce. Hiring managers who recruit and retain weak performers will undoubtedly receive a reduced bonus.
Impact on the Career Ladder
Wrong hiring decisions never go unnoticed by superiors especially when they are followed by poor business outcomes. Wrong hires not only limit your chances of promotion but also bring down your job opportunities at other companies.
Loss of Competence Among Co-workers
Hiring managers who take the “butt-in-chair” approach even temporarily can expect to lose the trust and respect of their superiors and subordinates. These people may also resent being on the same team with a low performer as it would ultimately reduce their productivity. Every wrong hiring decision can be attributed to a failure to stay updated, plan ahead and forecast hiring needs.
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