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The Cost of a Bad Hire in Redlands CA

May 14th, 2014

Most people who leave your employ don’t do so because they got fired for doing something bad. They’re let go because they can’t do the job, or – and this is far more common – they leave on their own because they don’t fit in with your company’s or department’s culture.

The Harvard Business Review has said that up to 80 percent of employee turnover is due to poor hiring decisions on the part of hiring managers

The cost to replace an employee who leaves (for any reason)? Estimates vary. The U.S. Department of Labor says it can cost from one-third of a new employee’s annual salary. These costs go up as the level of the employee goes up (line, management, executive, etc.).

On the other hand, the Society for Human Resources Management (SHRM) says the cost to replace an employee could be as high as five times his or her salary. What’s more, the longer the person stays in the position, the more it costs to replace him or her. So the account executive who was with you for just six months will be less costly to replace than the one who leaves after five years.

But even firing someone you’ve discovered isn’t a good fit in just six months can still cost you up to 2.5 times the individual’s salary.

Direct costs include any costs for outside recruiters, training and orientation, background checks and employment testing, and even weeks on the job while the person learns the ropes in his or new position. If you let the person go, you’ll have termination costs such as unemployment insurance, COBRA, possibly outplacement costs.

But indirect costs play a big role, too. There are the costs associated with managers taking time from other duties to look at resumes, perform interviews, training, exit interviews, and so on.

You also may incur costs when it comes to lower employee morale due to increased work load,, dissatisfied customers, even lost sales, or reduced production numbers.

How to Avoid Hiring the Wrong Person

  • Consider working with recruiters or a staffing company that specialize in the type of employees you seek. Many recruiters/staffing firms such as Arrow Staffing conduct skills testing to help match the candidate to the tasks that need to be done.
  • Make sure you have an extremely clear job definition. This should delineate the job’s responsibilities as well as the personality characteristics that will help the individual in the position succeed.
  • This may mean that you need to revisit the job description: tweak it or write a completely new one. After all, positions tend to change over time; make sure the job description you’re using for the position describes the job accurately.
  • When interviewing and checking references, check for those “soft skills.” How well does the candidate communicate with others? Does he prefer to be supervised closely or does she like more freedom in which to work?

Arrow Staffing has been helping Ontario-area companies find great employees for more than 40 years. We know how to get down to the nitty-gritty when it comes to an individual’s hard and soft skills. If you are looking for recruiting agencies in Redlands, contact us today.

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