What is the real cost of hiring the wrong candidate?

We understand the pressures that organisations face when finding candidates for a role they are trying to fill. There is always a need to find someone quickly and often there are constraints. Here we look at the real costs of getting the hiring process wrong.

The impact on the bottom line

There are a number of studies looking at the actual bottom line cost of recruiting the wrong people. I have talked to companies about this and in one of my recent conversations with a software company I learnt that the cost of recruitment for them was close to $500,000 a year. They have 50 staff and currently have a staff turnover of 20%. If they can reduce turnover by as little as 10% they could be delivery real savings to their bottom line.

Management Time

Stop and think about how much time you spend managing poor performers. In my discussions with executives they say it can be up to 20% of their time. That works out to be about one day a week or nearly a month and a half a year.

Law of attraction

Having average leaders in place means you are more likely to attract average candidates. This is not dissimilar to sporting teams. Recruit a star player and others will want to come and be part of this ‘team”.

Impact on team members

When you recruit the wrong person you place real pressure on your team. Often they will need to cover for the person, fix their mistakes and the culture you have built over the years starts to dilute and weaken.

Impact on customers

Having the wrong person in a role can seriously damage your relationships with customers. These relationships generally take year to build and are a valuable asset to your organisation. Customers are loyal to appoint and often make decision about you based upon their most recent experiences.

Impact on morale

A study by Robert Half found that 95% of financial executives surveyed said that making a bad hire at least some what affects the morale of a team and 35% said a poor hire greatly affects team morale and that 60% of hiring managers and HR professionals surveyed said bad hires don’t get along with other employees

The opportunity costs of hiring the wrong person

We know that we only have so much time to produce great results. If 20% of your time is spent managing poor performers this means that you are missing out on working on more impactful activities.

If you have any questions or would like to know more about effective recruitment processes please contact me paul@paulgreening.com


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