Avoiding the Cost of a Bad Hire
The Real Cost of Hiring the Right People
Let’s face it: Hiring great people takes a lot more time and money than most management teams anticipate.
With all the soft and hard costs associated with hiring, it’s nothing short of a miracle that organizations can onboard with the breadth and volume witnessed in industries like tech and healthcare over the last several years.
But times are changing. Hiring budgets are shifting. And retaining the very best people is more important than ever.
The average cost per hire for executives is $28,329, according to the Society of Human Resources Management. Another way to look at it: The average cost of a bad hire is at least 30 percent of an individual’s first year of expected earnings.
The cost can be greater depending on the effort a company puts into the recruitment and onboarding stages, not to mention the intangible effects on an organization’s culture, productivity, and reputation.
The question is, how do you avoid racking up costs for bad hires? The short answer: Stop making bad hires. That’s a lot easier said than done, especially when labor shortages make the job market more seductive for talented employees. Last summer, 40 percent of workers were considering quitting their jobs in three to six months, according to a report by McKinsey and Co.
Reducing the Costs of Bad Hiring
As the economy has shifted from the Great Resignation to the Great Rebalancing Act, employers are in a good position to rethink recruitment strategies and ultimately reduce the cost associated with bad hires.
Following are the steps companies can take to ensure they are talking to better candidates and helping employees with more staying power and less drain on resources.
Clearly define job requirements and expectations
We’ve all been there before. You have a vague sense of what you’re supposed to do in a new role, so you tentatively move forward without any specific knowledge of the destination. Same goes for job candidates poking around the careers section of a website, looking at poorly defined openings. If a company cannot clearly articulate a role and expectations, candidates will not align with the over-arching goals of an organization.
Conduct comprehensive interviews
Northwestern University teaches a course to its staff called the ART of Interviewing & Unconscious Bias Hiring based on the premise that “past behavior predicts future behavior.” When conducting interviews, employers should ask candidates to provide specific examples of past experiences that could be useful in the role they are pursuing. This is just one interviewing technique of many that can help hiring managers focus on the candidate’s personal experience, without imposing their own bias on why someone might be a good fit.
Use objective assessment tools
Artificial intelligence (AI) and machine-learning (ML) tools are making it a lot easier to understand a candidate’s potential through predicative models. We are developing an AI tool at MSH that helps hiring managers work more efficiently, while increasing the probability of making great hires.
Check references and conduct background checks
Conducting reference and background checks can help verify the candidate’s qualifications, work history, and character. This step can help you avoid potential issues that may not have been revealed during the interview process.
Provide ongoing training and support
Once you’ve hired a candidate, it’s important to provide ongoing training and support to help them succeed in their new role. This can include coaching, mentoring, and professional development opportunities. By investing in your employees, you can help them become more productive and engaged, which can reduce the risk of turnover and the costs associated with hiring and training new employees.
These are just a handful of ways to ensure your organization is hiring and retaining the best and brightest employees. By taking a thoughtful and comprehensive approach to hiring, organizations can increase the likelihood of finding the right candidate and avoiding the costs and headaches of a bad hire.
Additional Resources
Leading High-Performing Teams Course
