The Cost of a Bad Hire

According to the latest independent research from recruitment specialist Robert Half, 10% of employee turnover in Australia is the result of poor hiring decisions with almost two thirds (65%) of Australian HR managers admitting they have hired an employee who did not meet expectations.

“10% of employee turnover is attributed to a ‘poor hiring decision”

David Jones, Senior Managing Director at Robert Half Asia Pacific said: “As companies turn their attention to growth and profitability, every hire should demonstrate measurable results towards the company’s development and strategic goals, making the task of sourcing the right talent a priority for HR directors.”

In today’s market, businesses are time-poor and the stakes for skilled talent are high, especially when hiring the wrong talent can cost a business time, money, and damage its corporate brand.

The earlier the wrong candidate is identified, the more likely appropriate measures can be taken. The idea of letting an employee go is usually the first reaction, but it should actually be considered as the last option in order to keep the costs and losses already incurred as low as possible. Offering additional support, spending more time on the onboarding process or assigning a new or different role are more viable options that should be considered first.” according to  David Jones.

The implications of a bad hire can go beyond the monetary element, extending to the corporate culture and overall performance of a workplace.

More than half (55%) of HR managers said that loss of productivity is the biggest problem associated with making the wrong recruitment decision. Almost a quarter (23%) said that a poor hire reduces staff morale while almost one in five (19%) HR managers allege it has resulted in significant financial costs.  These costs can include the employee’s salary that did not reflect performance or output; education and training costs; impacted productivity of the employee, colleagues and management; potential loss of revenue and the ultimate cost to re-recruit for the role.

Which one of the following, in your opinion, is the single greatest impact of a bad hiring decision?

Lost productivity 55%
Lower staff morale 23%
Monetary cost 19%
Don’t know 3%

Source: independent survey commissioned by Robert Half among 100 Australian HR managers

David Jones added: “In a candidate-driven market where competition for top talent is high, it is pertinent that companies put in place efficient recruitment processes. Even though misjudgements in recruiting cannot always be avoided, companies can minimise the risk of a bad hire and the consequential costs by reviewing and evolving their recruiting processes, making sure hiring methods have been adapted to recent market changes. Companies should also ensure they work closely with their HR department and a specialised recruiter to establish a well-developed recruitment strategy.

Don’t Do
DON’T go it alone DO – Consult colleagues on attributes and competencies for the open role, and work with a specialised recruitment consultancy to find the best candidates.
DON’T use standardised job descriptions DO – In order to make your job description more attractive and increase the right applications, consider adding more information such as company values, compensation, additional benefits and training opportunities.
DON’T seek where others do DO – Source actively. The passive candidate market offers a huge potential. Many candidates are open for interesting job offers, although they might be currently employed. Developing employee programs where premiums are granted for successful referrals can also be very useful.
DON’T think the internet has all the answers DO – Cultivate a talent pipeline by personally reaching out to your network and recruiting sources. Online tools can be valuable, but personal interaction is the most important aspect of the hiring process.
DON’T take too long DO – Extend an offer once you identify your top candidate. Companies that don’t move quickly risk losing good people to other opportunities.
DON’T’ offer a low salary DO – Offer a compensation package that, at a minimum, meets the market standard. Stay current on prevailing trends by reviewing resources such as the 2016 Robert Half Salary Guide.
DON’T fail to differentiate between must-have and nice-to-have candidate attributes DO – Identify the skills that are mandatory and those that can be developed. The goal is to hire the person who is the best match for the job and your work environment.
About Prof Janek Ratnatunga 1129 Articles
Professor Janek Ratnatunga is CEO of the Institute of Certified Management Accountants. He has held appointments at the University of Melbourne, Monash University and the Australian National University in Australia; and the Universities of Washington, Richmond and Rhode Island in the USA. Prior to his academic career he worked with KPMG.
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