The Costly Truth of a Bad Hire
A bad hire can throw your company’s budget and productivity out of alignment. Corporate culture is a fragile and living organism. When you recruit the right employee, you add great value to your workforce and your business. Inversely, when you hire the wrong candidate, it can be detrimental to employee productivity and be a drain on other employees’ time as well.
The Hard and Soft Costs of a Bad Hire
Making a bad hire can negatively impact your budget in many ways. Here’s how:
- On-boarding expenses are measured by the time and money spent to bring the new employee up to speed. These expenses include training hours that could have served productivity in other circumstances, salaries paid, trainers, training material and more. Training a new employee takes time away from other employees. It may also require sending the new hire to a third-party training or to conferences to fully immerse them in the ways of the business. It may take up to 90 days or more for the new employee to be fully integrated into their new position. If or when the new recruit never does catch up to speed, these become unfortunate sunk costs.
- Incentives, benefits and health care costs associated to every employee’s benefits are costly. When it is time to part ways with a bad hire, a severance payment may also be warranted. This additional cost makes the bad hire an even more regrettable decision.
- Recruiting efforts relate to the amount of time and money your hiring managers spent pursuing, interviewing, screening and making offers to candidates. This time can never be recovered and slows the business’s current affairs. The latest Compensation Planning Outlook published by the Conference Board of Canada calculates the average time-to-hire as such: 15 weeks for an executive-level job, and 9 weeks for a mid-management job. This amounts to close to a year quarterly.
- Loss of productivity. Only one bad hire can have a down-spiral effect on a once-strong team. Competent employees simply pick up the slack and take on additional tasks and responsibilities. The result is a loss of efficiency and heightened employee dissatisfaction, the latter of which can lead to additional turnover and turmoil. Thirty nine percent of respondents in a survey conducted by CareerBuilder reported that bad hires cause productivity to fall. Thirty-three percent of respondents said that morale was negatively affected by bad hires.
The Effects of a Bad Hire on Your Bottom Line
Replacing an employee takes a lot of time to advertise, recruit, interview, and hire. A CBS News article recently listed the cost of replacing an executive-level employee as being, on average, 213 percent of the annual salary for the position.
Recent studies have estimated the cost of a bad hire to be anywhere between 1.5 to 3.5 times their annual salary. These numbers are just touching the surface. They are referring to costs you can measure and calculate objectively such as cost of posting, cost of HR time, cost of managers involved in the interview process and training. Thus, when you hire the wrong mid-level accounting manager earning $60,000 annually, the real cost to your organization will range between 90,000 and $210,000.
Have 27 Weeks to Spare?
Even when firms realize they have made a bad hire, they seem to be slow at terminating the employee’s contract. In a recent survey, forty four percent of respondents said it took them less than 4 weeks to realize they had made a bad hire, yet it took an average of 16 weeks to let the person go. The survey also reveals an average 7 weeks turnover to put a replacement plan in place, time during which seventy percent of businesses put the added workload and stress on existing staff members.
Stop Wasting Your Money on Bad Hires
A bad hire has higher costs than you think. Working with a reputable recruitment firm can substantially reduce the risk—and costs—associated with hiring the wrong employee saving you time, money and staffing headaches.
If you are looking to quickly recruit qualified accounting and finance professionals, our expert recruiters will give you access to more talent, more rapidly, than any other finance recruitment agency across The Greater Toronto and Vancouver Areas.
At The Mason Group, we work with all size organizations from start-ups to Fortune 500s and we recruit and place professionals at all levels from Financial Analysts to CFOs for permanent, contract or interim type positions.
To learn more about our services and speak to one of our recruiters about your specific recruitment needs contact your local Mason Group office today or send us an Online Consultation Request by filling the form below. Hiring consultations with our team are completely FREE.
Placement Guarantee: At The Mason Group, we stand behind every candidate we place. If you are not completely satisfied with the person you hire, we will find you a replacement at no additional charge.