The Cost of a Bad Hire

Hiring the right candidate is a critical aspect of running a successful business. Recruiting costs time, money and effort: according to reports by Oxford Economics, the average cost to replace 1 member of staff is £30,614.

The cost of recruiting can often be overlooked as it is not an ongoing process, but if the process is not successful it could be financially detrimental to an organisation. Hiring costs have many elements including; advertising, HR management, temp staff, administration work and agency fees, just to name a few. That said, there are some benefits of agency fees; they take a lot of the advertising costs away, they save time and a lot of recruitment companies offer a rebate period, therefore if the unfortunate circumstance occurs and you have made a bad hire, hopefully, you shouldn’t incur the cost of the recruitment process again.

Once the offer has been made there are additional costs that an organisation suffers, including training, benefits package and equipment. Training is an expensive, high-risk investment, due to the ‘breakeven point’ – Michael Watkins explains in his book, an employee will only start adding value after 3 months and the company will see a return on their investment after 6 months. This demonstrates the importance of the correct hire, and also the importance of staff retention.

The analysis from Oxford Economics supports these findings, discovering on average it takes a new recruit 28 weeks to reach optimum productivity level – estimating a cost of £25,000. Also in an employee’s early stages it is important to consider other effects they may be having on the business; i.e. customer service errors due to employees not being up to speed.

These costs strongly demonstrate the importance of choosing the right candidates for your vacancies.

In addition to financial costs, there is obviously the loss of time which can be frustrating and cause a knock on effect on work that needs to be done in the business. There is also the impact a bad hire can have on current employees: frequent staff turnover can affect morale; if a new member of staff has a bad attitude it could easily spread through the team; and the time it takes for a new recruit to get up to speed may increase other employees workload, consequently increasing stress levels to meet the business demands.

All of these could ultimately really affect the company culture, which could lead to other employees handing in their resignation – meaning the cost of the recruitment process again.

Recruitment is an extremely important process that needs to be done accurately and efficiently to limit the financial strain on the business and also to ensure companies can grow in the speed and manner they envisage.

When Foundation Recruitment partner with a new business, we invest our time to understand your company culture, business values and long-term goals, so that when we find the right candidate based on skills and experience and we can be confident they will be the right team fit and forge a long lasting, productive employment.

Kat Whitehead, Marketing and Operations Executive, Foundation Recruitment