The Cost of a Bad Hire|The Cost of a Bad Hire

The True Cost of a Bad Hire

When you make a bad hire-what's the damage?

In its latest research report, commissioned by Glassdoor, Brandon Hall Group outlines the cost of a bad hire and the implications on organizational performance. The report also details the steps organizations can take to improve the prospects for a good fit between the candidate and organization.

What is the cost of a bad hire?

When it comes to making a bad hire, most companies just think of the cost to post a job and the lost salary. However, the cost of making a bad hire can be far more extensive and includes the time it takes to recruit, interview and select, onboarding time, the impact on employee morale, and more.

Why is it so important to not make a bad hire?

With top talent at a premium and executives typically costing $5,000+ to bring on board-never mind the added cost to an organization to part ways if things go south-companies need to get smarter about their hiring because of the real cost of hiring the wrong employee. Organizational growth, profitability and damage to employer brand are all part of the costs associated with making bad hires.

In new research, Brandon Hall Group takes a hard look at what bad hires-entry-level to the C-Suite-truly cost an organization, strategies to mitigate that cost, and proactive ways to attract better-fit candidates. Here are some of the report highlights (and some things to keep in mind at your organization):

1. Calculating the cost of a bad hire

Most companies underestimate the cost of hiring the wrong person, when in actuality, a bad hire can impact an organization in a variety of ways. For example, Zappos found it was spending $100 million on bad hires and now offers employees a $3,000 separation bonus to exit the organization if they are unhappy within the first few months.

Brandon Hall Group identified three variables that are constant in calculating cost-per-hire as well as the additional variables associated to determine the cost of a bad hire to each organization:

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2. Standard interview processes impact the costs of a bad hire

Sixty-nine percent of companies surveyed in Brandon Hall's research report identified a broken interview process as having the greatest impact on the quality of a hire.

A few steps organizations can take to avoid interview problems include:

  • Having a consistent interview strategy.
  • Creating a checklist of questions for interviewers to choose from in each interview phase.
  • Implementing protocol for which recruiter, first-line supervisor, manager, director, VP, etc. should conduct the interviews at each stage.

3. Candidate experience matters for avoiding bad hires

Successful talent acquisition functions prioritize the candidate experience. Organizations that invest in their candidate experience state that their quality of hires improved by over 70%.

Here are five suggestions for improving the candidate experience at your organization:

  • Participate in talent communities.
  • Ask new hires and other recent job candidates to share their experiences on third-party review sites like Glassdoor.
  • Only 7% of companies have a strategy in place for their social recruitment efforts. Get involved on social to up your game!
  • Go mobile. Today's candidates expect recruitment to be simple and convenient.
  • Use videos to recruit. Whether part of a branding video or during a video interview session, candidates want the convenience and familiarity they expect from video solutions.

4. Invest in employer branding to avoid bad hires

According to Brandon Hall, companies that invest in employer branding are three times more likely to make better hires. Employer branding is a measure of the viability of a company's employee value proposition.

There are two main components of employer branding that you should focus on: image and reputation. First, image includes everything from the language you use in job postings to advertisements. Then, reputation includes combined sentiments of candidates, employees, customers and clients, usually based on first-hand experience. Using a tool like Glassdoor can help you build, measure and optimize your employer brand. With the essentials package, even small and mid-sized businesses can build employer brand equity that rivals large enterprises by leveraging additional advertising reach, enhanced employer brand features, and analytics to measure the recruiting impact.

Pro Tip: while most employers understand the image component, only the savviest organizations know that reputation rules supreme in brand. A brand that doesn't hold up to candidate scrutiny will continuously fail to bring in top talent.

For more information, check out this Fast Company article for high-level report findings, or download the full report.