There are many indicators of a bad hire, including consistently failing to meet deadlines, showing up for work late, exhibiting poor customer service skills and an inability to work as part of a team. When hiring decisions lead to an ill-fit employee, bad hire costs lower productivity and force hiring managers to spend more time finding new employees.
Bad hire costs include more than just disappointment in an employee. An article in Business Insider states that 42 percent of companies feel that a bad hire costs up to three times the employee's salary. To find this number, companies monetize time for the recruitment process, training, lost wages to the employee and any severance packages. When a company fires a new employee, it loses an investment.
Beyond an economic loss, a bad hire costs a company the time of its managers and the performance of other employees. Poorly performing employees require extra supervision, and managers must diligently check their work. This is time that managers need to spend on other job requirements. It also slows down other employees if the work of bad employees requires revision. Bad hire costs even reach into the morale of the company, depending on the size of the company and the nature of the position.
Adding to bad hire costs is any legal action from a disgruntled former employee. Lawsuits cost a company money and time better spent achieving organizational aims. It also makes internal company matters public, which harms the reputation of the company. Even if consequences do not reach a litigious point, the judgment of the hiring manager may become a cause for concern. Managers have the potential to lose credibility in future hiring decisions and during promotion processes.
The best way to avoid bad hires is to create a strategic hiring plan. Hiring managers need to survey company culture and develop specific ways to reiterate job expectations and information on the work environment during the interview. Behavioral interview questions help determine if a candidate is the right fit for a company. Hiring managers that check references and employ a slower method in the recruitment process have a better chance of filtering bad candidates from good ones. Managers also need to discuss bad hires during training programs, and companies need to develop materials to help identify bad hires.
When a company spots a new employee exhibiting negative behaviors, managers need to take action immediately to prevent the accrual of bad hire costs. Though the best way to prevent these costs is to avoid bad hires through using a targeted hiring plan, companies must take action if an employee is brought in and subsequently recognized as a bad fit, as more costs occur the longer bad employees are on the payroll.
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