We often talk about and arrive at figures for the Cost-per-hire (CPH) at the risk of distracting ourselves from ‘Quality of Hire’. Perhaps an analysis of the economic impact of ‘bad hiring’ decisions will refocus our attention as we embark on our 2016 recruitment drive. A Career Builder survey found 42% of companies reporting that a bad hire cost them at least $25,000, and 25% reported a loss of at least $50,000. A tracking study by Leadership IQ found that 46% of 20,000 new hires failed within 18 months. Of the new hires, another 45% were found to be only fair to marginal performers effectively meaning that 81% of new hires are a disappointment.
The Cost of Bad Hires varies by Country
The findings of the 6,000 hiring managers and human resource professionals in the Career Builder survey found that the single bad hire costs varied by country, for example:
- U.S.: $50,000.
- Germany: €50,000 ($65,231).
- U.K.: £50,000 British pounds.
- India: 2 million Indian rupees ($37,150)
- China: 300,000 CNY ($48,734).
In an article in Fast Company, Rachel Gillett wrote about Zappos CEO Tony Hsieh who offers new hires $2,000 to leave the company and his policy of hiring slowly and firing quickly. Hsieh maintains his past bad hires have cost his company over $100 million.
The Career Builder survey found that the costs could also be higher between lost worker productivity, time and expense in recruiting and training another employee not to mention the negative impact on employee morale and the client relationship. 21% of companies admitted that they hired poorly because they didn’t take the time to properly test and research the employee’s skills. For more insight into the cost of a bad hire and what you can do to avoid it, Mindflash have very conveniently produced this infographic of the key findings from the Career Builder survey.