In today’s market, 50% of hires are mis-hires. That is 1 out of 2 hires! This is a major expense to any size organization.
24% of companies reported that mis-hires cost them well over $50,000 and 41% reported it cost them over $25,000. Broken down a little further, it can cost nearly $40,000 to replace an executive level employee and anywhere from $17,000 – $24,000 to replace an entry-to-mid-level employee.
The real costs are actually much more than this! In fact, our research has shown that a mis-hire will cost 15 – 24 times a candidates salary.
So where do these costs come from?
- Recruitment advertising fees and staff time
- Relocation and training fees for replacement hires
- Lost customers and revenue
- Opportunity Costs
- Unemployment Costs
- Outplacement service
- Litigation fees
- Salaries and bonuses
Beyond the financial impact that mis-hires cause for organizations, there are other elements that suffer from a poor hiring decision. Turnover can weaken employee morale – one bad apple may not spoil the whole bunch in the beginning but effects can ripple through a team: high performing employees may slip into lower engagement and productivity while on a team that doesn’t fit, may motivate good employees to look for employment elsewhere, and even if a mis-hire leaves, the work that must be covered during the recruitment process falls on the whole team and can drag morale down.
For customer facing organizations, if the underperformer comes into contact with customers, vendors, or partners and their level of performance is noted that could potentially cause damage to an organizations reputation.
The financial impact is a huge consideration when looking for a new hire because no organization wants to waste money or time, but beyond the financial impact, making poor hiring decisions can have long term effects for all of your employees and overall business.
Now you know what it costs, how are you going to avoid it with your next hire? Find out next week when we provide tips on how to avoid a mis-hire and save your company money and time while finding the A-level employee you’re looking for.
Chris Hillman, Executive Search Expert
email: Chris Hillman
Telephone: (815) 261-4403 x 100