Most professionals understand that recruiting and hiring great employees is a critical aspect of business. So what happens when things awry?
A recent study addressed just that. “The cost of a Bad Hire”. You know, those employees that somehow made it on the payroll, and now everyone is wondering why and how? The gist of the report, as one might expect, was that allowing the wrong people in, was a recipe for disaster, and a very expensive one at that.
Companies estimated an average loss of $15,000 per “bad hire”, and over 70% of companies polled admitted they’d made at least one “bad hire” in recent months. A “bad hire” was defined as one who:
- consistently failed to produce the proper quality and/or quantity of work
- had a negative attitude
- didn’t work well with other workers
- had immediate attendance problems
- claimed skills that didn’t match actual skills/performance
To make matters worse, the study showed it wasn’t just hiring managers making bad calls, but employees were helping. Of employees queried, roughly 60% said they’d accepted a job, and shortly thereafter realized it wasn’t a “good fit”. Around 50% of them quit within a few months, while around 35% said they just “stuck it out”.
The estimated cost to replace an employee was estimated at 21% of annual salary. At a minimum, the costs included:
- Hiring Replacements (advertising, screening, interviewing by human resources and management)
- Onboarding (training, management and oversight)
- Any former employee unemployment hearings, tax docs, legal action, etc.
- Lost production during the transition
Indirect Cost: (the significant one)
The study suggested even higher costs come when “bad hires” are kept around. The good workers, who work hard, think the game, solve issues, work well in the team, and lead by example, start to question things. The “dud” workers coming in, create chaos and dysfunction, and left unchecked, drive the high performers away. Performers want to play on a winning team, and if losing hope, start looking for a better team to play on. If they go, there goes your investment; the knowledge, experience, the positive energy. It’s just gone, and yet the bad hire is still there, hurting your business and posturing to do greater damage. Repeat the process a few times, and pretty soon, it’s impacted the prevailing workforce culture.
So how to mitigate? You have fix the problem, and prevent it from happening wherever possible. The only sure way to cure cancer is to cut it out, and that can be painful. With ruminations, unemployment costs are high, the risks of legal action must be considered, and feelings get involved. Regardless, you simply have to make the call, because if you don’t, the long term damage is far greater than you might experience in the short term. In many cases, this can mean a long drawn out process of creating documentation via warnings, etc., while more damage is being done.
How can WorkSource help? Utilizing a temp-to-hire structure can yield immediate benefit, and dramatically boost your “successful hire” rate. The temp-to-hire onboarding structure allows you to:
- See an employee in action, on the job, for weeks (attendance, culture fit, attitude, skills, performance) before they ever make it onto your payroll
- If things go bad, you can just end a worker’s assignment, immediately, without any of the concerns that go along with “terminating” an employee (better yet, WorkSource will contact the employee and end the work assignment for you; there’s no drama on your end)
- Improve your hiring via redundant screening processes: WorkSource pre-screens and filters candidates down top candidates, and you can then further screen and filter from there.
Most people come to find that when all the factors are considered, a temp-to-hire staffing structure can pay for itself financially, and emotionally. If we can answer any questions for you about our Temp-to-Hire, or Direct Hire services, simply send us a note using the form below and we’ll contact you.