CompanyMatch White Paper – The True Costs of a Bad Hire

Published on 08-06-2017

A great workforce is every organisation’s capital. A bad hire therefore not only generates enormous costs, in the region of 50,000 euros or pound sterling per candidate, but also has a negative impact on the productivity and efficiency of the whole company. But what exactly is a bad hire and what are the true costs of it? Even more important: How can we avoid a bad hire? Our new white paper “The True Costs of a Bad Hire” is going to answer those and other questions, based on current scientific research.

White Paper Bad Hire

Bad Hire – Definition and Contributors

A bad hire describes somebody who negatively impacts the productivity, efficiency, performance and culture of an organisation, as well as someone who only remains with the organisation for a short period of time. Most of the time these employees leave an organisation within 18 months.

Reasons that lead to bad hires are often just as complex as the recruiting process itself. The Brandon Hall Group defines five main contributors in their current research report:

  • Job interview process
  • Weak employer brand
  • Negative candidate experience
  • Insufficient onboarding process
  • Lack of information

Bad Hire – True Costs

Most organisations underestimate the actual costs of a bad hire because it affects the performance of an organisation in several ways.  The results of a current CareerBuilder survey reveal the true costs of a single bad hire:

  • 500 or less employees: 9.500 Euro / 8.500 £
  • More than 500 employees: 19.500 Euro / 17.000 £
  • More than 1,000 employees: 21.300 Euro / 18.700 £

Different factors are responsible for the enormous costs, including remuneration, training and recruitment. An organisation, for example, invests approximately 45 hours in recruiting and onboarding a candidate. A better understanding of these factors can help to lower the cost of them and decrease the chances of a bad hire. The effects of a bad hire, however, go further than those business aspects. A bad hire or mismatch can negatively influence fellow employees’ productivity and the working environment as a whole, it could also impact customer satisfaction levels and sales. A recent survey showed that 36% of the participants felt that bad hires had a significant impact on the organisation’s productivity.

Recruitment 4.0. – Hire for Cultural Fit

Leading companies are putting more emphasis on preventing bad hires. The first step is to better understand the candidate’s perspective and to identify their drivers, values and motivation in an early stage. Especially Millennials will want to work for an employer they can identify with and they can represent personally.

Adapting to these trends, developing and improving recruitment strategies, is crucial for a company’s long-term success. There are five key points to be addressed to increase the chances of preventing a bad hire and create long-term employment:

  • Consistent recruitment strategies
  • Active corporate culture
  • Promote employee engagement
  • Improve candidate experience
  • Cultural Fit over hard skills

A consistent recruitment strategy can only be achieved if a company standardises the application process, especially job interviews. As interviews play a crucial role in successful recruiting it might help to look at proven models to standardise the process. Methods such as “peer interviews” or “behavioural interviews” are especially successful when recruiting for cultural fit. A study by the Brandon Hall Group showed that 60% of the companies implemented a recruitment strategy that was aligned with the company’s objectives after having researched successful interview models.

An active employer branding strategy should be a priority for every company that would like to avoid bad hires. That is why a company should communicate information about the corporate culture through multiple channels from orientation through to decision phase. If an employer brand reflects the company’s culture clearly and accurately, the likelihood of a miscasting decreases significantly. Transparency is the key word according to a Glassdoor study which shows that 90% of job seekers would like to work for an organisation which actively promotes transparency.

To ensure the development of a healthy corporate culture, which is the foundation of every employer brand, many experts emphasise the importance of a cultural fit. Recruitment should not only focus on hard skills and experience but also on a candidate’s personality. A cultural match is essential in preventing a bad hire.

Interested in more information and other recent research about the true costs of a bad hire? Download our white paper for free! Please do fill out the form below to download our white paper which is also available in German.