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The Cost of Bad Hire and How to avoid it

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Sep 16, 2018

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No matter how selective and established the recruiting process, there is always a possibility of hiring the wrong person. Poor hiring decision affect many aspects at your company. Financial loss is only one of them and you will be surprise of how bad it will affect the company.

Here is the real cost of a bad hire that you probably never realize:

- Financial loss. This is really obvious. Just imagines all the expense you have to pay during the recruitment process starting from creating job ads, hire an agency service, the tools that were used during recruitment, and also time taken up of managers and HR people. The U.S Department of Labor stated that the financial loss of a bad hire is at least 30% of the employee’s first-year earnings.

- Negative impact on the morale of the team. A bad hire that is underperforming or having bad habits will affect negatively to the rest of the team. The other team members will have to tolerate it, cover up for mistakes, take over the slack and working double to cover their co-worker. This is not a healthy working environment. Not only the morale will suffer, the standard and productivity of the whole team will drop down, and in the long term it will cause an even greater financial loss. One more thing, the other good employee will quit just because they can’t stand it anymore.

- Time spent for coaching underperformance employee. The manager will have to spend more time coaching the under-performance employee. It means, they have to keep give corrective feedback, micromanaging the employee job, giving out discipline and warning letters, and by the end of it, they have to think on how to fire the employee and starting the whole recruitment process once more.

This whole thing is wasting time. The manager should be able to focus on developing their employee through training and short course, rather than have to focus on the under-performance employee.

- Bad habits spread like a virus and infect other employees. A bad hire may spread his/her bad habits to everyone else surrounds. Even after removing the employee from equation, you still have to invest resources and time to reset the behavior of other team members.

The cost of a bad hire is tremendous. The question you have to ask right now is how to avoid it or at least minimize it in the first place?

Here are a couple of things you can do about it:

- Check the candidates references

Talk with the people that your candidate worked with in the past. It will give you more insight about the candidate skill, experience, and attitude.

- Multiple approaches

When you are planning to recruit new hire, always use multiple approaches to increase the chance of getting a better candidate. Do not rely solemnly on job ads, use other approaches such as tap onto your network, ask for employee referral, work with an agency, and so on.

- Dig deeper to hire the best fit

Dig deeper into the candidate experience and skill to find out whether he/she will be a good fit for the company. Present the candidate with actual scenarios that they have to succeed it in. It will show you how they act under the situation and do they have what it takes to get the job done.

- Clear expectation

Always set clear expectation, job role, and everything else that the new employer will have to do. Set it clear during the first week and explain the consequences. If the employee fails to achieve that in the allocated time, move with the consequence action which could mean you should fire them.

There is no secret formula of hiring the right employee. Every CEO and manager will make a bad hire in their life. The key is to take precaution and fire the one that didn’t work out.

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