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The True Cost of a Bad Hire and How to Avoid Them

The True Cost of a Bad Hire and How to Avoid Them

What Exactly is a Bad Hire?

A bad hire is often thought of as a new or existing employee that does not perform or produce to the level that was expected for their role, therefore negatively impacting the productivity, performance and morale of the workforce and leaving other employees to pick up the slack.  In other cases, employees unable to align to the company's culture, values, or collective behaviors, can also negatively impact the composition and behavior of the workforce, creating a toxic work environment. 

Consequences of a Bad Hire

A poor hire can have a significant and detrimental impact on an organization. Low morale, decreased output, and increased turnover are just a few of the negatives. Financial repercussions include the cost to source, onboard and train both the bad hire and then the replacement for that individual. In addition to the financial costs, companies must consider the productivity lost while the position is unfilled, the damage to team synergies and the potential harm to customer relationships. In extreme cases, there may also be legal fees incurred in the event of an employment dispute. The average cost of a bad hire is estimated to start at $17,000 and go up to as much as a whopping $240,000 according to Businessnewsdaily

To help calculate the potential costs, a company can consider:

1. Hiring costs

2. Training costs

3. Interim replacement job coverage 

4. Turnover costs

5. Potential loss of property, reputation or incurred  liability

The evaluation of a good hire is a complex procedure that takes into account several variables. Key elements may include:

1. Strong work ethic

2. Cultural fit

3. Minimal need for re-training

4. Consistent performance

5. Adherence to company policies

While it is not always possible to identify a potentially bad hire prior to employment, having  a robust hiring process that includes a pre-hire assessment programme and a thorough background screening process can help ensure higher quality hires. In all cases, the approach should be unbiased and consistent. 

The Warning Signs of a Bad Hire

There are many signs of a poor hire. Some may overstate their abilities or need ongoing oversight and ‘hand-holding’, while others may struggle under pressure. In some cases, individuals may find it difficult to pick up new skills or adapt to changing circumstances - this may hinder their progress or performance at the organization. In the worst case scenario, a bad hire has the potential to undermine the performance of the entire team or the whole company.  Some early indicators of a poor hire may include:

1. Change in expected personality and work ethic

Interviews on their own may not be sufficient instruments for assessment. The hiring organization may believe during the interview that they are connecting with the candidate personally, but once on the job differences may become evident. The risk of this disconnect can be minimized by employing more specific and robust interview questions which we will explore in more detail within this article.  A person’s personality and work ethic are difficult to assess based on a resume. For these reasons, a more thorough interview process should be used to evaluate candidates.

2. Employee skills do not match candidate claims 

It’s highly likely an interviewer will discuss the candidate's skill set throughout the interview. If they actually possess the abilities and skills the company is looking for - great, job done! Other times, candidates overstate their abilities in order to get a job. A good way to verify how the candidate performs on the job is by checking with previous employers through a reference check. Alternatively, integrating assessments or activities that require the individual to demonstrate the skills expected as part of the interview process can act as an early indicator or measure of their abilities related to the role.  

3. Unwilling or unable to adapt to the working environment

Culture is a driver of success in organizations. Engaged employees embrace the company’s vision, mission and culture as part of their work responsibilities. It is also important that employees abide by company rules and practices including standard working hours, appropriate use of company assets and respect for other employees. Employees that are unwilling to meet these expectations can cause friction with those that they work with which could be a sign that they are not right for the position. 

The Interview Process

To avoid bad hires, companies can use a checklist of questions for each candidate that includes both behavioral and skills based inquiries. Doing so helps recruiters to see a more holistic view of the candidate that goes beyond just the skills and qualifications to determine if the person will be a good fit for both the role and the company. 

Interviewing can be an uncomfortable process, but it doesn't have to be. It is important that companies take initiative in creating a positive hiring experience for candidates by setting clear expectations.  This can take the form of providing materials in advance to guide individuals throughout the interviewing process, or a live chat function to answer questions about the role and the company. A company should strive to ensure a positive outcome for both parties involved, with the candidate gaining clarity in their career aspirations, while the company  receives high-quality employees with valuable skills.

When interviewing candidates, it can be helpful to let your guard down and  break the ice with informal conversation to start. This not only sets the candidate at ease, but you never know what you might learn about the person or how they can help your company grow. 

A negative experience could make a candidate wary of interviewing with your company in the future or may dissuade others who they share their experience with. Try to keep an open mind - instead of ‘no’, maybe it is a case of ‘not right now’ if the individual interviews well but is not necessarily a fit for the specific role. Or, if you are looking for someone to do freelance or part-time work, consider offering them a trial period before recommending them for full -time employment. This trial period gives the candidate and company alike a sense of the working relationship before it becomes a long-term arrangement. It also gives your company a chance to test out this person's capabilities and see how well they get along with other employees, an important factor that can't be judged before someone is on the payroll.

Interview Questions that can Potentially Reveal a Bad Hire

We've all been there. You are interviewing a candidate, and it's not going well. The conversation is awkward, you seem to be asking the same questions over and over again, and it just feels like the person isn't a good fit.

Let’s start from the beginning. Always try to ask open ended questions that allow the candidate to provide additional insight. For instance:

"Tell me about a time when...." Allow the candidate to provide a specific example and then ask a question that goes a level deeper. Asking the result of an action and how those results affected the organization helps to demonstrate their value.

Incorporate questions that provide an insight into the individual’s character and their ability to reflect and learn from the past. Some example questions include:

"We all have to make difficult decisions. Can you tell me about a time when you had to make a tough decision? What led to the situation, what decision did you make, and what was the outcome?" From this you can observe the following:

Coherency of the story, critical thinking, cognizance of the effect on others as a response to the decision and an understanding of cause and effect.

How would you describe your work ethic?

This question will tell you if the candidate is driven and motivated. It will also tell you how they view work and if their work style fits what is needed for the role.

What kind of training have you received in your field?

This can provide insight into proactive personal development the candidate has done to increase their knowledge and skills beyond what is found on their resume.

There are some other questions you can ask that can help you determine whether or not the candidate is right for the job. These questions will help you find individuals who are looking for something more than just a paycheck.

1) What do you think is your greatest strength? 

2) What do you think is your greatest weakness?

3) When was the last time you failed at something?

4) What made your previous boss/co-workers most happy/unhappy with you?

Implementing behavioral-based interview questions into your selection process is a great way to identify potential bad hires who are going through the motions of interviewing, but don't  have serious interest in the position.

Conclusion: Protect Your Organisation Against Employee Mis-hires

Bad hires are not uncommon in the workplace. While having to let an employee go because they are simply not a fit is time-consuming and costly, the issues can be far greater. What if a mis-hire intentionally puts the company at risk or steals from the company? Bad hires can create a negative culture, cause damage to the company’s performance or reputation, or even act in inappropriate ways that lead to a lawsuit. All of which can cost a company both time and money. 

While it is not always possible to avoid a bad hire, comprehensive pre-employment background  screening is the first line of defense. Comprehensive screening, including reference checks, will help to ensure that an interviewee has the right skills, credentials and work ethic to meet  your company's needs. Instituting a periodic employee rescreening program helps to ensure your staff continue to meet those company standards and requirements. 

From pre-employment background screening to structured interview questions, testing and assessments there are a variety of methods at the disposal of employers to avoid the dreaded bad hire.

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