The cost of a bad hire

August 14, 2018 Caitlin Leishman

Interviewer shaking hands with candidate before an interview

In an organization of any size, it doesn’t take long to experience the detrimental effects of a bad hire. Making the wrong hire can manifest itself in many ways that negatively affect your organization. Additionally, it can take an inordinate amount of time, energy, planning and funds to hire a new employee.

A 2017 study by CareerBuilder suggests that 43% of organizations make bad hires because they feel pressure into making a new hire. In the same study, approximately 22% admitted that they lacked the correct tools/skills to effectively conduct interviews.

While the costs differ from organization to organization, countless thousands of dollars of dollars could be lost from just one badly executed hire.

According to the US Department of Labor, the cost of a bad hire represents up to one third of a person’s first year earnings. Very importantly, aside from the negative financial impact, bad hires also hurt an organization’s engagement, retention, morale, and productivity. When an employee isn’t contributing to the team or performing correctly, their colleagues will find themselves paying the price, often manifesting itself as disengagement and disharmony on a larger scale. Similarly, poor performers set a bad example in terms of standards and quality and may well affect other employees’ job behavior.

The most successful and proven means by which to improve hiring practices is to strategically implement competencies and software tools. The cost of these solutions pale in comparison to the cost of just one single bad hire … making it easy to make a very easy, sensible and sustainable financial decision.

Competencies are the knowledge, skills, and abilities that are needed to succeed in a specific job and organization. Competencies empower recruiters to assess behavioral traits that are traditionally difficult to observe and document.

By implementing competencies and competency-based interview questions, you ensure that new employees have the necessary qualifications to be successful.

Competencies are useful at assessing values that may be important to your organization, such as teamwork. A candidate may be technically qualified, but if they don’t share values in alignment with your organization’s core competencies, they are unlikely to be successful.

Strategically incorporating competencies in your hiring practices, you will quickly ensure hiring candidates who are good fit both the job concerned, and for your organization. Hiring exceptional candidates means reduced onboarding costs and a new employee able to adapt more quickly to their new job and organization.

As the talent lifecycle progresses, continuing to use sustainable and intuitive competencies in assessments, learning and development, and succession planning will assist in delivering lower turnover and higher retention. 


Want to learn how to run competency-based (behavioral) interviews? Get started with our Quick Guide:

Download your Quick Guide on How to Run Behavioral Interviews using the form below.



Post last updated: June 27, 2019.

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