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What is the real cost of making the wrong hire?

25 Feb 2020

It's no surprise that hiring the wrong candidate is going to cost you.

What if I told you it could cost your business tens of thousands, sometimes more!

According to a report from the Recruitment & Employment Confederation (REC), over a third of companies don’t believe the wrong hire will cost them at all. However, results have shown that an average mid-level hire with a salary of £42,000 would cost your business over £115,000, plus the inconvenience of restarting the recruitment process. There are a number of reasons for this, outlined in the infographic below: 

 

 

How do you end up hiring the wrong candidate?

It’s important to remember that even if someone has the right skills for the job or an enviable track history in a similar role, they may not be a good cultural fit for your company. With this being said, it is essential to gauge this in the interview process, a this is often the first mistake that companies can make...using a poorly structured or outdated interview process, that doesn’t effectively help you to establish whether this candidate has the technical skills or personal attributes for the role and working environment / culture. Take a look at our Interviewer's Guide for some basic advice on building a better interview process.

The second most common mistake is simply not accessing the best candidates in the market. This is often a result of a recruitment process that focussing on utilising job boards (That are targeted to get you as many “job views” from active jobseekers as possible), rather than a focus on fewer, high quality applicants and those in the “Passive Candidate Pool”. 

The great news, is that these 2 issues can be easily rectified….but more on that later!

The hidden costs of hiring the wrong person 

Spread too thin
Not only does a bad hire cost you money (Salary, hiring costs, NI, training, IT, office supplies etc), it also costs your management and workers TIME and ENERGY, that can easily double the financial cost of the hire. You will often find that your team have to take on the extra workload, to compensate for the person who should be doing the work (the wrong hire!). This, in turn, could increase stress leading to further costs if employees resign, exacerbating the problem. 

Opportunity Cost
It’s also vitally important to consider the “opportunity cost”, something that is often forgotten amongst the other issues of onboarding and ultimately exiting an employee. If the hire is in a client facing or business support role, it’s likely you will have allocated some income or client retention targets to them that will not be achieved. You will already have lost significant (potential) income during the research and hiring period, when you had an empty desk, so this is the oft forgotten cost of a bad hire.

Morale
Bringing in a new employee, who isn’t culturally the right fit for your business, could easily lead to friction in the team and if not managed quickly, a decrease in current staff morale. An unhappy work force is a recipe for disaster, as it could lead to decreased productivity; and time is money!

How to avoid hiring the wrong candidate

The good news is that all of the above is easily avoidable by following some basic steps, whether you want to manage the whole process yourself or work with a specialist recruitment partner:

  • Use the tools available to you – Don’t limit yourself to adverts in the local newspaper or job boards. Employee referrals, social media and word of mouth are all additional pools where you can access suitable candidates.
  • Use your gut - This tends to be a good indicator for concerns (and we’ve all said ‘I knew it’ when something goes wrong!). Trust your instincts and acknowledge the red flags if they are there…It’s better to start the process again than expose yourself to the full costs above.
  • Check references - Check out your candidates’ previous employment by speaking to the references they provide. Your instincts can be powerful, but facts and opinions give you a good review of your candidate. This is an effective, FREE resource, which could help you rein in a future costly mistake.
  • Ask your employees - Bring in a second opinion. If you are still unsure about your interviewee, bring in a respected employee to give you their opinion. This can be a really valuable step if you are having doubts.
  • Role Play & Testing - Test your candidate with some workplace scenarios or even some proper Psychometric / Behavioural Profiling. This will give you an insight into how they would approach and deal with a situation as well as providing a scientific element to your interview process.
  • Outsource the responsibility to the experts – If you have an IT issue, you speak to the IT specialist. If you have a tax question, you go to your Accountant. With a recruitment issue, why not speak to a Recruitment Expert? The right recruitment partner is an expert in all aspects of the process and will allow you to focus on running your business, while they do the hard work of finding the best person and ensuring they join your business. Often with a significantly lower overall recruitment cost!
 

Why IDEX

As an innovative, independent Recruitment and Talent Management Consultancy, we have been providing bespoke hiring solutions to the Insurance, Financial Services and Legal sectors since 2006. 
Our entire philosophy is based around finding you the best employees to allow you to grow your business and be successful….That’s why our tag line is “Taking pride in making YOU successful!
This is evidenced by our statistics below, which we are incredibly proud of:

Our 4 step methodology: 

 

We pride ourselves in partnering with your business to make YOU successful. We establish what success looks like to you, which means hiring the right people to get the job done.

 

 

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