This year has redefined both where and how we work. Now more than ever, companies are cutting costs where they can while attempting to maintain workplace morale. In any organization, a large amount of money is spent every year on the recruitment and hiring of new employees.
To minimize wasted expenditures and ultimately save on hiring costs, it is imperative that companies focus on putting the right person in the job the first time around. When an employee is a bad fit for a role, there are not only negative fiscal ramifications, but other less obvious costs as well. A bad hire can increase turnover costs, lower productivity, and lower overall morale. Let’s dig into what these negative impacts can look like in an organizational context.
Needless to say, hiring a new employee is very costly. According to the Society for Human Resource Management, the average cost per hire is between $4,000 and $5,000, with triple that cost for executive roles. And that’s just to get someone in the door. If the employee turns out not to be the right fit, the company has lost that cost of recruitment and any potential training costs, and also has to start the process over again to refill the position. In reality, then, companies may easily spend $8,000 to $10,000 or more to identify one hire who is a good fit for the role. On top of that, time and productivity losses occur when a bad hire turns over. This is especially noticeable if the employee was brought on to work on a project that has an approaching deadline or specific deliverable.
If cutting costs isn’t reason enough, a bad hire will also lower productivity levels. Those who aren’t a good fit for the role will likely produce work and deliverables that are not up to par and require additional review, feedback, and development. Other employees are forced to take on the work that is not being completed or is not being completed to your company’s standards, which puts additional strain on overall capacity and productivity. SHRM estimates that when a bad hire turns over, the total cost including lost productivity, lost hours of training, etc., is typically about 40% of the individual’s salary. Furthermore, if the new hire is in a customer-facing role, that bad hire becomes visible to your customers, which can lead to confusion, uncertainty, or even lack of trust in your brand.
Finally, a bad hire can lower organizational morale. Hires who are not a good fit with other personalities in the organization lead to tension and strain within a team. That tension ultimately affects existing employees’ attitudes toward their jobs, other co-workers, or the company itself. Similarly, when staff have to help pick up the slack from a bad hire, they are working harder and longer with no additional compensation or change in job title. At times, these employees find themselves working on projects with which they are unfamiliar and were not originally hired to do. These are prime conditions for a lack of job satisfaction, employee engagement, and overall morale.
Higher turnover costs, lower productivity levels, and lower organizational morale are just three possible impacts of hiring a bad fit for your organization. The simplest way to avoid these ramifications is to put extra time and effort into hiring a good fit on the first try. Investing in finding the right fit ultimately results in numerous benefits for your organization and for your existing employees. There are many different tools available to help your organization invest in finding a good hire.
Some of those tools include behavioral-based interview guides, cognitive assessments, or personality-based assessments. You can also ask Motivational Fit questions in your interview, which give you additional insight into whether or not the candidate’s beliefs about work and the position are consistent with your organization’s values. Consulting firms like PSI are here to help you figure out the best process for hiring for specific jobs within your organization. Whatever you do, the extra work up front will pay off in the long run by ultimately reducing hiring costs, lowering turnover, and maintaining positive productivity and organizational morale.