As a business owner, you know how important it is to balance the budget and plug any holes that are causing your business to leak money where it shouldn't. But have you considered the impact on your business if you mistakenly hire the wrong person?
A recent survey by The Australian estimated that a bad hire will cost you two and a half times the employee's salary, a figure which goes up even more for high level positions.
To put that in perspective, if you pay a new employee $70,000 a year and they turn out to be a bad fit for the role, you could find yourself out of pocket by $175,000.
Here are some of the main costs of landing a bad hire >>>
New employees cost money
Put simply, employees cost money. In the long run, they also bring you money, and a good employee is worth investing in, but what about the bad hires?
First you have the outlay of running recruitment ads, preparing the interview, and the time taken out of your schedule in chasing references and performing the interview itself.
Once your employee is appointed you will have to meet both the time and monetary costs of training, and the outlay for any new equipment, business cards and so on. For a good employee this will turn out to be a valuable investment; for a bad one, a drain on your precious resources.
Increased supervision and reduced productivity
Under-performing employees typically need more in the way of your time and effort to supervise their work and try to keep them up to speed with their tasks and working practices. An employee who is lazy, procrastinates, or quite simply doesn't grasp their responsibilities will unfortunately keep you on your toes.
A bad hire can also drain time from other members of their team, by holding up work, making mistakes, or with frequent demands for assistance. There is a real risk of reduced productivity, which in turn costs you more in terms of both time and money.
Risk to your peputation
A bad hire poses a serious risk of damaging your reputation, and that of your company. Your employees are the public face of your company, so if a hire lets a customer down with substandard service, it reflects badly on your business.
As the owner, you're seen as ultimately accountable for your company as a whole, including a team member who doesn't deliver good service to your customers.
Employees who don't deal directly with customers can also damage your reputation with costly mistakes that can lead to a loss of time, money, and a dent in your reputation with both your customers and your competitors.
A bad hire can have a devastating impact on the morale and cohesion of the rest of your team. Whether due to slacking, incompetence, or having an unpleasant manner with their colleagues, the wrong hire can sap the energy and positivity out of a team faster than you can say "you're fired".
Unfortunately, you might also find yourself dealing with some resentment among your existing team, for hiring someone who is rapidly becoming a thorn in their side.
However you look at it, a bad hire can cost your company a lot of time, money, and even your reputation.
To save yourself the stress, check your hiring process and make sure it's thorough and designed to give you an insight into the whole person, from skills to interpersonal manners.
It's worth the time and monetary investment early in the process, in return for a recruitment process that works for you and will help you find employees who are worth investing in.
About the author
Tristan Anwyn is an author who writes on subjects as diverse as health, marketing, creating a budget, and SEO.