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October 2018

Calculating The Cost Of A Bad Hire

Calculating The Cost Of A Bad Hire

Posting an open position in your workplace can feel a little bit like being a judge on American Idol; you have no idea what you're going to get (and occasionally you get much more than you asked for), but sometimes you're able to narrow down the field to a find the right person for the job -- or so you think.

Flash forward to weeks or months later and your "perfect hire" has become anything but: whether they're late, break the company's rules, or simply aren't the person you thought they were, you're at a loss... literally. The cost of a bad hire, especially if positions seem to be cursed to stay open with the frequency in which people abandon them, can be utterly devastating on a business' time and resources.

"The cost of a bad hire is always extensive," said Arte Nathan, founder of The Arte of Motivation, a human resources advisory service based in Las Vegas. "Most companies don't know the full cost of the turnover, so they don't apply the resources upfront to avoid it. If you make a bad hire, there is a ripple effect among all who work for you, your product and your product quality."

Nathan is right; the best way to prevent that extensive loss is to upgrade your human resources department (perhaps through the use of an HR consultant), and particularly focus on your human resources recruiters. One of the best ways to do this is to redesign your interview process: by creating a standardized interview that remains the same throughout all potential hires, you will be more able to adequately compare them to each other. Human resources recruiters should also be trained to notice red flags that may indicate a lack of motivation in their interviewee, saving those costs down the line.

Additionally, high turnover rates aren't always caused by the people coming in: many companies are unable to provide enough support and satisfaction for their employees, so they seek other means of employment. For example, 86% of companies that implemented employee recognition programs described an increase in employee happiness as an immediate result -- if people are happy in their positions and environments, they won't be nearly as tempted to leave.