Avoiding the hidden costs of a bad hire

Today, more than ever, any misstep in your talent strategy is costly. Competition to keep your skilled talent is intense, as organisations actively seek to attract qualified candidates to fuel growth. At the same time, the candidate market is tight, creating real pressure to act fast to secure talent, or risk missing out.

Increasingly, we’re seeing the flow-on effect of the rush to hire. With urgency often comes compromise, which is leading to an increase in bad hires across all levels of business.

But what does a bad hire really cost?

According to Robert Half research, 86 per cent of Australian business leaders agree that the negative impact of a bad hire is more severe today than it was a year ago. What’s more, the average cost of a bad hire is estimated to be the equivalent of 15–21 per cent of their salary (depending on their seniority) once you factor in lost productivity, revenue, time, resources and morale.

With this in mind, it’s clear that an employee who doesn’t fulfil their job description will hurt your organisation, at a time when many are already doing it tough. From the immediate costs of wasted time hiring and training, through to decreased morale among teams and stress on supervisors, the ripple effect of a bad hire runs deep. While a more thorough screening and hiring process will likely reduce the risk of a mistake, the current candidate market conditions may not allow for this.

As some businesses struggle to restore their staffing to pre-pandemic levels, the impacts of bad hires are amplified. Resources are already stretched, so there is less of a buffer to absorb the effects of poor hiring decisions, particularly in smaller companies.

In response to the skills shortage, employers are offering higher salaries to attract talent, which can skew priorities. Some applicants focus purely on money without fully assessing if the opportunity is a good long-term fit.

Candidates may also be chosen based on their ability to fill an immediate niche skills gap, rather than their soft skills and overall suitability for the role and organisation.

So, in the face of these challenges, how do you minimise the chance of “bad hire” regret?

The organisations who succeed are those who strip back their interviewing to focus on the essentials, and adapt their review process so decisions can be made at pace. But while there is a definite need for a swift hiring procedure, it must not be at the expense of making good decisions. Even quick hiring processes still take some time, and a bad hire can put you back to square one, with the potential added challenge of an even smaller talent pool.

Assessing and securing top talent quickly is possible when you apply a strict set of criteria and a critical lens to the process to guide your decisions. I recommend the following:

• To start, work out your exact requirements, identifying the “need to have” versus the “nice to have” criteria against which candidates are evaluated.
• Be clear about the non-negotiables, and where you can flex or develop internally.
• Get all stakeholders to sign off on a detailed job description, so you’re on the same page and can fast track any suitable applications as soon as they arrive.
• Design an evaluation process that is streamlined to focus only on the must-have attributes.
• Use situational interview questions or a short skills assessment to understand applied ability under pressure.
• Use reference checks to understand more about how the candidate has applied key skills in their previous role, and to identify any areas that need to be proactively developed once they are onboard.
• Cut the interview process down to two stages – a virtual interview to screen and secondary in-person interview to make your final decision.
• Reducing the number of decision makers involved to the bare minimum can speed up the review process too.

Remember, a faster hiring process should never come at the expense of creating a connection with the candidate. With skilled talent receiving multiple job offers, taking the time to sell the role and the company is vital. Find out what they’re looking for in an employer, in terms of the role, culture and financial reward, and address any reservations upfront. You’re not only more likely to get the candidate over the line, you’re also more likely to bypass potential bad hires and find the right fit.

Andrew Brushfield, director Robert Half