The high costs of bad hiring in a company, and how to avoid it.

Return on Investment on a wrong hire may prove a waste of time, money and resources, especially when it causes lags in the workflow.

Photo credit: Tima

The hiring process entails, finding, selecting and hiring of new employees in a company. The process takes place in three stages; planning, recruitment and employee selection. However, depending on the hiring process of a given company, the selection of a new employee may vary depending on the role.

While the main aim of hiring is to recruit a candidate who is the right fit for the advertised position, sometimes, it is possible to have the wrong candidate for the job. Hiring an unfit candidate, can be attributed mainly to two factors;

• When there is pressure to quickly fill a certain position within a company.

• When the hiring manager has failed to do extensive screening on the candidate.

In a research, HR Statistics highlights the following issues as the reason to why background checks should be made a routine;

• 53% of all job applications contain inaccurate information.

• 49% of the 3,100 hiring managers surveyed had caught a job applicant fabricating some part of his/her resume.

• 34% of all application forms contain outright lies about experience, education, and ability to perform essential functions on the resume.

• 9% of job applicants falsely claimed they had a college degree, listed false employers, or identified jobs that didn’t exist.

• 11% of job applicants misrepresented why they left a former employer. 

•  Negligent hiring cases have had verdicts costing up to $40 million.

• The average settlement of a negligent hiring lawsuit is nearly $1 million.

The hiring process is a tangible investment for a company; thus it should be treated with utmost fragility that it deserves. In 2015, 42% of small business owners identified hiring new talent as the biggest challenge. On the other hand, Bad hiring, is like a poison tree, and can cost a company 30% of it’s annual earnings. It’s devastating impacts includes;

1. Productivity costs – when other employees have to work extra hard to meet deadlines.

2. Financial costs – companies view the hiring process as an investment, where they would provide an employee with suitable environment for career growth and development. And they would expect Return on Investment. However, the Return on Investment on a wrong hire, may prove a waste of time, money and resources, especially when it causes lags in the workflow.

3. Employee morale costs – when a team feels like there is one staff who is derailing them, and often they have to cover his share of the work for the same pay. A company may lose good employees just because of it.

4. Reputation costs – where customer relations is key to a company’s success, hiring an unfit candidate to deal with clients may result to mistreatment of the clients, who may in turn give bad reviews about the company. At the same time, good employees who opt out, may give negative reviews about the hiring process of the company.

For a company to avoid these kinds of costs, they should: -

• Have a wide background screening policy to verify candidate’s information, and gauge whether they’re the perfect match or not.

• The hiring personnel should be very specific about the needs for the position.

• You should ask for referrals from other relevant institutions.

• Call the applicant and verify his credentials, before the interview.

• Be aware of bias hiring.  

• Pay close attention to performance in the first few months of the newly hired employees.