The Cost of a Bad Hire

February 20, 2023

Have you ever heard of a “bad hire”?


If you think about it, it’s almost an oxymoron because who even “hires” a “bad” person or employee in the first place?


Well, if you think hiring mistakes are uncommon among organisations, newsflash—they’re not.


In fact, according to an article from Human Resources Director (HRD) NZ, 76% - or about three in four senior managers that they polled - say “they’ve made a recruiting blunder -- wasting time, energy and money in the process.”


To add to this, 64% or two in three hiring decision makers surveyed said the negative impact is “more severe now than it was a year ago” as businesses recover from financial shackles post-pandemic.


Looks like “bad hires” are more common and a bigger issue than it might first seem.


Hiring the right employee is a crucial part of your business strategy, as it can have a significant impact on the success of your organisation. On the flip side, a bad hire can be a costly mistake that can drain your company's resources, disrupt your team culture, and damage your reputation.


The cons of hiring an inefficient employee outweigh its pros (if there are any), and two of the main points that we’ll cover in this blog are the financial cost and the effect on productivity within an organisation.


Here’s a breakdown of the impacts of a bad hire on an organisation:
  • Lost time and investment in the recruitment/hiring process
  • Training and equipment costs
  • Loss of productivity (due to vacant role)
  • Time/cost in managing bad employee out


Let’s dive deeper into each one of these impacts.


Financial cost aka the most crucial one

The financial cost of a bad hire is at the top of the list, starting with the cost of training resources, equipment, stipends and allowances, to name just a few.


To prove this point, a snippet from a Forbes article details that according to the U.S. Department of Labour, “the price of a bad hire is at least 30% of the employee's first-year earnings”, and that for SMEs or startups, “a five-figure investment in the wrong person is a threat to the business.”


Additionally, the time and cost involved in managing the bad employee out can be tedious, particularly if it involves a legal process.


Impact on company culture

Beyond the financial cost, the impact on your team culture can also be highly destructive.


A toxic and incompetent employee can lead to decreased morale, and good employees may begin to look for opportunities elsewhere. This results in a potential loss of other good candidates to your competitors, which can be a consequential blow to your business.


Reputational damage

Reputational damage to internal and external stakeholders is another concern.


A bad hire can reflect poorly on your company and may cause others to question your judgment and decision-making processes. This can be particularly damaging if the bad employee is involved in a public-facing role, as they can cause harm to your brand and reputation.


Loss of time and tight competition for the best candidates

A bad hire can also cost you the time involved in hiring a replacement, which can be significant, especially if you have to compromise on a candidate because of the time and resources already invested.


Not to mention that you may also miss out on top-tier candidates who may have been available during the first round of the recruitment process.


Ensuring the success of good hires

Without a doubt, hiring a bad employee is no good to any business, as it incurs more losses than gains, hence ensuring that you nurture good hires is more crucial and is highly beneficial to your organisation’s productivity.


Here are few key ways that your business can get the top talent for the role and ensure their success within their tenure:


1. Define the job requirements and qualifications clearly.

The first step is to clearly define the job requirements and qualifications. This will help you attract the right candidates and avoid hiring someone who is not a good fit for the role.


A poorly written and vague job description could attract inappropriate candidates, and start a tedious journey you don’t want to participate in.


2. Use a comprehensive screening process.

A comprehensive hiring process that includes appropriate rounds of interviews, assessments, and reference checks will help you make a more informed hiring decision.


This process should also include a review of the candidate’s resume, cover letter, and other relevant documents.


3. Get feedback from team members.

Getting feedback from team members or higher-ups who will be working closely with the new hire is crucial to ensuring their success. This feedback can help you identify any potential red flags or areas of concern before making the final decision.


4. Consider cultural fit.

The candidate’s values, work style, and personality should align with the company culture. This will help them feel comfortable and happy in their new role, which will ultimately lead to a more successful and long-term tenure.


5. Provide onboarding and training.

A well-structured onboarding program will help the new hire adjust to their new role and responsibilities more easily and provide them with the skills and knowledge they need to succeed.


Final thoughts

With the ongoing financial ruckus among organisations post-pandemic and the global recession potentially waiting just around the corner, SMEs, start-ups, or even bigger businesses who watch their expenditure closely cannot afford to hire a bad employee.

 

To avoid the potential impact of a bad hire, it is crucial to have a thorough and effective recruitment process in place, and a competitive and trusted recruitment agency like Recruit I.T. can help you achieve this with ease and maximum efficiency.


We at Recruit I.T. offer a seamless and thorough recruitment process for hard-to-fill roles. From sourcing, evaluation, screening, up to the selection process, Recruit I.T. and our team of trusted and professional Consultants has your back to ensure that you’ve got the good hires on your side.


To know more about Our Services, visit our website here or get in touch with one of our Consultants.

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