The Real Cost of Replacing a Mis-hired Employee
If you’ve ever hired someone who impressed you before they were an employee only to disappoint you afterward, you are sadly far from alone. In fact, studies have shown that within a year of being hired, an astounding 84 percent of new hires will not live up to expectations.
The worst part isn’t the frustration at their failures, the need to let them go, or even the slog of having to find someone new to take their place – it’s all the money that a “mis-hired” employee can cost.
How much are we talking about? Well, the Department of Labor’s minimum estimate is $11,713, but experts conservatively say that you can at least triple that figure, and some put it astronomically higher.
Citing the fact that many companies don’t recognize or deal with a mis-hire immediately, expert Dr. Bradford Smart estimates that the average mis-hire earning $100,000 will end up costing $1.5 million. For some industries, like finance, a mis-hire can cost even more to replace.
Why is the Cost So High?
There are a number of different factors that go into what a mis-hire can cost. Some are industry-specific, but most apply no matter what field you’re working in.
Mis-hires force companies to redistribute funds to find their replacement. Finding someone new costs money. Money to run ads, do background checks, pay people to interview them and engage in phone screening, and run pre-hire tests. And that doesn’t even account for the training that person will require once they are brought in to right the ship.
Mis-hires equal missed opportunities. If something is hired who just can’t get the job done, there’s a good chance that they are going to harm the company’s reputation with customers, miss out on entering markets just as they’re picking up steam, and waste money on things that the organization really doesn’t need.
Mis-hires negatively impact the work environment. Even after a mis-hire is let go and someone better suited for the positions replaces them, they are still going to have to deal with a culture that has likely been wounded. Mis-hires can lower morale, push high-performing employees out and hire more people who share their mindset, and directly or indirectly encourage bad behavior in their staff. All of those are problems that can’t be solved overnight, and companies will continue to spend money during the interim.
Mis-hires waste everyone’s time. When someone can’t do their job well, it can’t help but take up other people’s time. Maybe people on their team need overtime to pick up the mis-hire’s slack because he or she isn’t finishing enough work. Or the HR team is constantly dealing with issues stemming from disputes involving the mis-hire instead of spending their time working on ways to make the company run better. Beyond all of that, the simple need to get rid of them and bring in someone new is something that costs hidden money because of all the time it takes to make that happen.
Get It Right the First Time
Mis-hires in key positions can literally take a company under if you let them, but that doesn’t have to happen. As a recruiter, it’s your job to ensure that doesn’t happen.