What Is The Cost of Hiring The Wrong Person?!
Updated: Mar 15
Hiring The Wrong Person Is Much More Than The Cost Of Their Salary!
By Jatinder Singh, Lighthouse Global Associate
Have you ever sat in an office with a colleague that is negative or perhaps you don’t get along with them well because of their "bad attitude"? Perhaps because you hear them make snide remarks about everyone and you know they love to make others feel weaker while making themselves feel better. Furthermore, it’s not just you that feels this way. It is virtually everyone in the office. So you can safely say this time, 'it’s not me, it’s them!!'
Have you ever thought about the wider implications of them being in that office? For example, the impact that they have on the overall morale of the office? After all, it only takes one or two rotten eggs to contaminate a much larger proportion of people and have an entire office of people negatively feeling the effects of those gremlins!
Have you ever thought about how many other employees may have left the company to move elsewhere because of the impact of the said employee on them?!
In addition, have you ever thought about the cold hard financial cost of employing that person?!!!
Ultimately all of these factors are very subjective and are hard to assess accurately. What is clear though is that virtually all of us know there are very real issues that we have encountered in one way or another during our working lives.
The Effects of Hiring the Wrong Person In the Office
I know I certainly have. As someone who was an accountant, having worked in a number of corporate offices and then in recruitment, I found it extraordinary how blasé companies were in that attitude to hiring. The accountant in me was always going “what a waste of money!!!” when I used to see the huge turnover of staff in companies, but also I used to feel frustrated when I saw or heard about employees that were destructive in their work environment from friends and acquaintances. This part of me, the sensitive human that I am, carried the scars of my own challenges working in environments that I never felt I belonged to. Occasionally I was also the bad egg in the office but that is a story for another day that will soon be coming!
And my observation appears to be backed up by recruitment giant Robert Half. Based on a 2019 survey they conducted, Greg Scileppi, President of International Staffing Operations said:
“A bad hiring decision can often cause a negative ripple effect through the organization….Hiring a bad fit or someone who lacks the skills needed to perform well has the potential to leave good employees with the burden of damage control, whether it be extra work or redoing work that wasn’t completed correctly the first time. The added pressure on top performers could put employers at risk of losing them, too.”
So what is the financial cost of employing the wrong person?
Staggeringly it has been calculated that the financial cost of many of the above factors of hiring the wrong person is £132k (for someone in a 42k mid management role). This is over 3x their base salary and this figure includes a financial estimate on the indirect problems of bad employees highlighted before, such as loss of morale and productivity.
How Big is The Problem of Bad Hires?
If the monetary cost isn’t bad enough, how big is this problem? After all, if it is only a small percentage of overall hires that turn out bad, then perhaps it isn’t a big enough problem for companies to be worried about?
Well according to Leadership IQ, they estimate that 46% of hires turn out to be bad!! They estimated that in the first quarter of 2017, 1,864,700 hires were made in the UK. This means that almost 746,000 were wrong! That is 746,000 people in the wrong company at the wrong time for them!! If each of these bad hires cost a company or organisation £539 per week (the average UK weekly salary according to ONS salary data) this would cost the economy £402 million pounds per week and over 20BN per year!.
The Number of Problems from Bad Hires is Largely Ignored
Of course, numbers and statistics are always liable to errors and different ways of calculating because of methodology. The key point is that this problem costs a company a lot of time, money and effort and yet it continues to exist on such a large scale. If a manufacturing company has 25% of their products made unusable and it cost them almost 3x their original estimated cost price they would soon go out of business. At the very least they would be taking every precaution to minimise their mistakes.
But when it comes to hiring the wrong employees, companies don’t have the same attitude or intention. Even if it is not 100% solvable to never hire the wrong employees, companies could certainly reduce their mistakes by understanding why they are hiring the wrong people and then taking active steps to reduce it. This is something that I will be looking at in the next blog.
Lighthouse Global has started a campaign called Business Against Trolls because we believe that workplace bullies need to be held accountable and that businesses need to be able to identify bullies before they are employed and spread their poison throughout the organisation at great cost of time, money and effort. We have experienced first-hand the issues that happen when you bring the wrong people into your team and the toll it takes on other team members and relationships, let alone the financial costs.
You can find out more about Business Against Trolls here.
If you would like to discuss anything I shared in this post about workplace negativity caused by employees please feel free to email or connect with me on Linkedin.
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