Hiring a new employee carries some risk.
The person you choose to hire may look and sound great during interview, but he or she may turn out to be a poor performer in the end. It is essential that you try to avoid making a wrong hire, because it can cost your company dearly.
According to The Harvard Business Review, about 80 percent of employee turnover results from poor hiring decisions. Here is a look at the potential costs of a bad hire.
Financial Loss
In a survey conducted by CareerBuilder, about 41 percent of companies estimated that a bad hiring decision cost them more than $25,000 and 25 percent said that it cost them more than $50,000.
The financial cost of replacing a bad employee can vary greatly depending on his or her position in your company.
The Labor Department estimates that the average cost of replacing a new hire is about one-third of his or her annual salary.
Some of the expenses that are involved include interview expenses, orientation and training, employment assessment, termination costs, potential legal expenses for wrongful dismissal, relocation and career transition. A large portion of the financial loss results from the need to repeat the hiring process to find a replacement.
Lower Productivity and Work Quality
Poor job performance is usually the main reason why a particular employee is considered a bad hire.
An employee who is not making enough effort to fulfill his or her job duties satisfactorily can have a significant negative impact on the overall productivity of your company.
If he or she is constantly failing to meet deadlines and delivering poor quality work that needs to be redone, it will take a longer time for your company to complete projects and possibly cause your workforce to become more disorganized.
Negative Work Environment
Hiring the wrong employee can also have an adverse effect on the morale and satisfaction levels of other employees.
Competent employees may be required to pick up additional work because of the incompetence of the new employee, and they may feel dissatisfied as a result of that.
If the new employee has an attitude problem, he or she can undermine teamwork and create an inharmonious work environment, which can in turn hinder your business performance.
Reputation Damage
Employees who deal directly with customers are the “face” of your business, and their attitudes and behaviors can affect your customers’ perception of your company.
If the new employee occupies a customer-facing position, he or she can jeopardize your relationship with your customers. Poor service and negative attitude can upset and frustrate customers, and cause them to lose loyalty. A bad employee can cause significant damage to your business reputation even if he or she is with your company for just a few months.
A good workforce is one of the key ingredients for business success.
As such, you have to take the necessary measures to ensure that you hire the right people for your company.
Photo credit: pinnacleplacement.com
About the Author: John McMalcolm is a freelance writer who writes on a wide range of subjects, from human resource management to online reputation management services.