The Costs of a Bad Hire

2612 The Costs Of A Bad Hire

​2008 was a different time for a Recruitment Consultant. The Australian economy was booming and there was a distinctive skill shortage within the Victorian Property and Construction markets. People were being employed if they could spell “Revit”, let alone whether they could use it.

Okay – my last comment may be a slight exaggeration – though there was a definite “bums on seats” mentality amongst firms and arguably some reckless hiring taking place.

I was guilty of such practice myself. In 2008, I hired two (seemingly qualified) recruitment consultants who didn’t make it past their first week. I soon learnt that the cost of a bad hire extended well past the new computer and a week’s salary.

Fast forward to 2013, and firms are still paying the price of bad hires. The market has tightened, and head counts have been reduced. Feedback from the industry is that rounds of redundancies have been used to “trim the fat” or “clear out the dead wood”, to cut ties with bad hires.

What are the Costs of a Bad Hire?

Direct Costs

The obvious cost of employing an additional staff member: salary, superannuation, the cost of a new computer, business cards etc.

Sourcing and Screening Costs

I have written thousands of adverts in my career and it still takes me 30 minutes to write a good one, let alone the time to post the advert to various job boards. Add on top of that, the time invested into screening and shortlisting resumes, conducting interviews and references, and then responding to unsuccessful applicants… you would be lucky to get change out of 30 hours.

Getting Them Up To Speed (or at least trying to!)

Induction and orientation costs time and money. So does training. Poor performers absorb their manager’s time far more so than top performers. They require a higher level of supervision for an extended period of time.

The Impact on the Team

Top performers like to be surrounded by top performers. If you have developed a culture of excellence within your team, introducing an underperformer into the fold can potentially undo your hard work.

Impact on your reputation

“You’re only as good as your last game” is a phrase that gets utilised regularly in the sporting world. In the corporate world, managers are judged on the decisions they make, rather than the games they play. A poor recruit has the potential to bring your decision making skills into question and impact on your reputation within the company.

Performance Management and Termination:

Having to manage someone’s performance takes time and energy. This is time and energy that is wasted when the goal of performance management is often to justify the termination of an employee. It is the means to an end. Add to this additional time and money if the complications arise from terminating their employment (e.g. the termination is disputed).

Impact On Your Brand

In a service industry, client relationships are of the utmost importance. *From my experience in 2008, I can absolutely attest to the negative impact an underperformer can have on client relationships. If your staff aren’t strengthening client relationships, they are weakening them.

While natural rate of attrition is healthy for an organisation, a high turnover of staff is not. Regular turnover of underperforming staff raises questions amongst stakeholders and can impact on a client’s confidence levels in your team.

The Clean Up

We’re not done yet. After all is said and done, and the underperforming employee has left your organisation, the clean-up begins. Poor work must be fixed, performance expectations within the team reiterated, client relationships mended and your reputation as a decision maker restored. This can take weeks, months or even years.

How do we avoid a bad hire?

Measure Twice, Cut Once

Something that my father instilled in me from an early age. Recruitment is often urgent in nature. Before employing someone, ensure you have a true understanding the current need as well as future requirements. What are the absolutely essential skills for the role, and what are the desirable ones? Consider this for current workload and project future workloads. What skills can and can’t be trained? What is the culture of the team? What personality and attitudinal traits will complement and strengthen the existing team? Develop comprehensive criteria to assess your applicant pool against.

Prepare for the interview

Once you have established the criteria for the position, ensure you utilise it consistently when interviewing applicants. Have a clear understanding of what information you want to gain from a candidate in an interview, as well as what information you want to share with them. For more information on effective interviews, view my blog on Who’s interviewing who here?

Due Diligence

References are a critical part of the recruitment process, though regularly overlooked. Ensure you obtain at least 2 verbal, professional references. Where possible, complete a reference with someone that you know and trust, or at least someone that you know of, in order to better ensure accuracy.

Don’t Hire Someone Because You Like Them

“Because we got on” or “they made me laugh” are not reasons to justify hiring someone. “Because they effectively met the criteria of the role” is. We are all human and are naturally drawn to those who we can better relate to or “like”. Be as objective and consistent as you can when interviewing multiple candidates.

Don’t Settle for the Best of a Bad Lot

Don’t settle for someone who is a 6 out of 10, particularly if their shortfalls are critical to the role. Before employing an underperformer, consider the total cost of doing so. I am confident that those costs would outweigh the costs of the position being temporarily vacant.

Pull The Trigger

If you do find the right candidate, hire them. While the quantity of job applicants has increased, there is still a distinct shortage of quality. If someone ticks all of your boxes, it is likely that they will tick all of your competitors. When you find that person, strike before one of your competitors does.

Use a Recruitment Agency

Here we go… the plug. Obviously I am somewhat biased but I do highly recommend utilising a recruitment agency when seeking to employ additional staff.

As a business owner, I use recruitment agencies to assist me in finding staff. A number of my clients find this somewhat humorous – a recruiter who has to use a recruiter – however, I would find it hypocritical if I didn’t. I partner with a handful of recruitment agencies who thoroughly understand my business, my culture, and the framework of the role I am looking to fill. They also have a much broader and deeper candidate network than I do. With their understanding of my business and market reach, I expect them to provide a more comprehensive shortlist of suitable applicants than I can (and do it much quicker than I can!).


In this coming June, Aspect will (touch wood) celebrate 4 years of 100% staff retention – a feat virtually unheard of in an industry riddled with high staff turnover. We have gotten here by following the above methodology when recruiting – and not deviating from that methodology.

A bad hire is like letting a hand grenade off in your office. It can be destructive to productivity, office environment and your business’s brand, leaving the team to pick up the pieces. Bad hires cost employers’ time, energy and money – 3 things that we all wish we had more of.

Avoid bad hires at all costs!