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  • The Woolf Partnership

What Exactly IS the Cost of a Bad Hire?

The rate of unemployment in the UK has fallen below 4% this year, seeing 473,000 more people in work this January than the same time last year. A great statistic, however with talent being in high demand, at times it can be easy for an organisation to rush to make a crucial hire. It is also easy for businesses to miss the value of sourcing the right person.

Businesses come in different shapes and sizes and views on recruitment are formed in similar ways. Listening to a small, fast growing business describe their attitude to hire recently, struck a chord. Finding someone quickly without the necessary search in the market, would be a rapid response to a gaping hole in their business. Recruiting someone in a short time frame, and not spending money on an engaged recruiter would mean having someone in place sooner, for less money. If they discovered that they had hired the wrong candidate, they could always rectify it later. This sounds simple, right? Well, not to me.

As an optimist I always look on the bright side. Sure, there is a chance that by placing an advert out for the role, within a very short time frame the perfect candidate will present themselves, without a notice period and be able to hit the ground running. They will fill the immediate void, and then some. They will be the simple solution for a painful problem. But what happens if that isn't the case?

Quick to hire, an organisation may choose the first person who comes their way, on paper they may look fine, in practice they may be less than suitable. What is the cost to an organisation for bringing someone into a team, a business, a partnership, that is just not the right fit?

“When hiring, we look at a variety of factors, including education, experience, and skills. The biggest factor by far, though, is a candidate’s ability to fit in with our existing culture.” ~ Sarah Cooper

Interviews, meetings and training someone new takes time. Time that you would otherwise be giving to your customers. For every hour meeting you are having with a potential candidate you could be dedicating to commercial work. Investing in people is so important, but if that person is the wrong person, it is simply wasted hours. Training people can be seen in the same light. A manager's time given to training, or an in-house trainer spending time with a new recruit is valuable, before we even consider the cost of technology or equipment.

Attrition is never positive for a business. Watching someone hired and fired in a short space of time has a negative impact on morale. Take a scenario where a team has been anxiously waiting for a manager for some time. They are not consulted in a speedy interview process and they meet their new manager. In just a few short weeks it is clear they are not the person they were hoping for. The manager leaves and the team are once again left without a leader, except this time they feel under valued and under represented. Not only were they not consulted in the interview process, they were also misunderstood by their business. Sourcing someone who didn't meet their team values and aspirations indicated the organisations lack of interest in their own team. With another team member gone individuals feel that maybe there is a reason people are leaving, perhaps there is a need for them to start looking for a new role too. Moreover, a new candidate then being considered for the already tainted role, would question why someone would leave, so quickly after joining.

Critical hires are typically critical because there is a job that needs to be done immediately. Sourcing the wrong candidate will ultimately mean that the role they have been hired to do is not done, and in some cases is done badly resulting in someone else needing to pick up additional work. Slow pace of business has a direct result on output and an impact on business success. Felt more so in a smaller organisation than a larger one.

“If you make a hiring mistake, make the change quickly. Don’t ignore problems. Don’t assume it will get better.” 
― Ziad K. Abdelnour, Economic Warfare: Secrets of Wealth Creation in the Age of Welfare Politics

I can hear you sceptical people ask "but what is the actual cost to my business?" This is, of course quite hard to measure. According to the US Department of Labour (apologies to my American friends, I can't quite bring myself to type 'labor') a bad hire can cost up to 30% of an employee’s potential first-year earnings. That is before you take into account the repercussion of the bad hire on employee engagement, and morale.

So what should you do? Hire carefully. Hire wisely. Hire the right people for your business. That can be via strong and dedicated Talent Acquisition teams, brand ambassadors who are committed to developing teams in their organisations. It also could be through a connection you may already have - although I would remind hiring managers to take care not to hire in their own image nor rush to make decisions based on personal relationships. It can also be with trusted partnerships through recruitment agencies and search firms. Spend time with your suppliers, find out if they are the ones for you. If they are, the cost of using them will seem nothing compared to the cost of a bad hire.

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