Hiring is not a perfect science. Mistakes happen. But companies can ill afford to make too many, especially when hiring executives to lead their organization.
Executive search in Toronto is high stakes. Every decision made when hiring executive talent will have a big impact on the organization, financially and otherwise. It will impact the company’s direction, culture, morale, and it can have a high financial cost if you make a bad hire.
Companies need to have strong recruitment processes in place to properly vet candidates and minimize the risk of making a hiring mistake. One hiring mistake could expose you to the true cost of a bad hire. Below, we’ll discuss:
- The real financial cost of a bad hire
- The true costs of a bad hire
The real financial cost of a bad hire
Making the wrong hiring decision comes at a high financial cost. Research by the Society for Human Resources Management (SHRM) estimates that replacing a bad hire can cost up to 5 times the person’s salary.
For an executive making $200,000 per year, this means it could cost the company up to $1,000,000 in onboarding, recruitment costs, lost productivity, training costs, lost clients / damaged client relationships, and additional hours spent by others to make up for shortcomings.
The true costs of a bad hire
In addition to money, there are other true costs of making a hiring mistake. Our recruiters list the costs with the biggest impacts:
1. Lost productivity
Hiring the wrong person can quickly show in the form of lower than expected productivity. If a person is not cut out for a role, you can expect output slowdowns, redundancy, and inefficiency.
2. A negative impact on team morale
All it takes is one person to disrupt the company culture. A poor fit, whether in attitude, work ethic, or values, can undermine the company culture.
When a new hire is not meeting expectations, it can hurt morale. People get frustrated and are less engaged. Some people may even look for a new job, leading to additional attrition costs.
3. Increased workload for others
When one person falls short, others typically are forced to pick up the slack. This means more work, greater responsibility, and an increased potential for burnout and lower productivity overall.
5. Customer or client impact
A bad hire not only hurts internal operations. It can also impact external relationships. It can lead to mistakes, lost opportunities, poor service, and potentially losing clients.
If you develop a poor reputation, rebuilding trust or financial loss from dissatisfied clients can take time.
6. Progress delays
When a bad hire is replaced, it can bring all the projects under their portfolio to a halt. Projects can stop or be delayed. Slower progress could cause the company to miss opportunities.
Read more hiring advice from our recruitment team
The Pros and Cons of a Traditional Career vs. The Gig Economy
How to Hire for Long-Term Success: Focus on Potential Over Experience
The Importance of Employer Transparency in the Hiring Process
