How Much Are Bad Hires Costing You?

A commonly held statistic is that a hiring mistake can cost anywhere from 1.5 x to 3.5 x of that person’s “fully loaded” salary (i.e. includes benefits). However, this number can vary drastically. Some reports state that a more appropriate ratio for “blue collar” positions is 1 to 1, but a 2007 survey put the number at 3x base salary. The fact is that the cost of a bad hire will vary depending on the company, the job and the situation.

Let’s try to quantify that a little bit more, according to a recent CareerBuilder survey, 41% of employers reported that bad hires cost them more than $25,000, and approximately 25% said that bad hires cost them more than $50,000. This becomes even more significant since almost ¾ of these same employers state that the cost of a new hire (one that succeeds) is less than $5,000.

But what makes up these numbers? Well, there are the up-front costs of hiring – advertising, recruiter time, manager’s interviewing time, candidate travel costs, reference checks and drug-screening costs, relocation (if necessary), training and on-boarding costs, etc.

Then there are the hidden costs, which include productivity loss, lost business opportunities, damaged customer relationships, hits to employee morale, tarnished company image/brand, possible legal costs, etc.

Can we quantify these costs? Well, in a way we can. According to the same CareerBuilder survey, 9% of companies said bad hires resulted in legal issues and 11% of employers said they resulted in fewer sales. In addition,

• 41% stated that bad hires resulted in lost worker productivity
• 77% stated that bad hires resulted in additional costs (both hard dollars and time) to recruit/train another worker
• 36% stated that bad hires had a negative impact on employee morale
• 22% stated that bad hires had a negative impact on client services.

As a leading Human Capital Management (i.e. staffing) firm for over 60 years, Snelling knows the expenses and resources that are required during the hiring process, and why so many clients opt to partner with us for all their direct hire needs. We reduce the stress, strain and anxiety that the hiring process brings to the company.

In addition, we offer temporary-to-hire solutions that allow you to try out a potential candidate for an extended period of time, before making a direct hire offer. This solution can dramatically reduce the risk and expense of a bad hire. If customers complain or if there are immediate attendance problems, the situation can be resolved/corrected without any additional recruiting, interviewing, advertising, etc. costs being incurred.

So contact your local Snelling office today for more information on our direct hire and temporary-to-hire staffing solutions.