What’s the cost of recruitment mistakes?

Recruiting for a HR position can be tricky. When done correctly it’s a joy for everyone involved, but if the job goes to the wrong candidate, it can be a nightmare. Guy Clapperton, writing for totaljobs, looks at the cost of recruitment mistakes.

When the right people get hired for a HR job it’s a great thing. But if the hiring process fails, it’s worth stepping back, considering how the bad hire affected the organisation and learning from any mistakes so it doesn’t happen again. So what’s the cost of recruitment mistakes? And how can you avoid it?

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A bad hire scenario

So what exactly is a bad hire? Here’s an example:

Let’s take the sales manager with a great track record who comes into a business and one of the following happens:

  • They are too set in their ways to learn new stuff
  • They simply don’t understand the product
  • They have excellent sales skills but the company cultural fit is wrong

Inevitably sales will start to fall away as clients will start to move to competitors who can fulfil wishes better. That sales manager will then not only lose their own sales but they’re also likely to cause losses of sales from other operatives.

It may be possible to win the business back, but the client will cost the same to reacquire as they would if they were new business – possibly more. Add the cost of reappointing the right manager and you can start to see how this recruitment error can start spiralling very quickly (you might also have lost some sales executives who were disillusioned under the inappropriate manager).

And that’s not all. An employer will also have to deal with the following:

  • Administration costs when someone leaves a business
  • Training and development of the new employee
  • Induction of the person who is leaving – which will be made redundant by their swift exit
  • Payments to recruitment agencies – contractually there may be mitigation if a candidate turns out to be unsuitable but it’s still going to cost something.

The overall cost of a bad hire

So far so hypothetical – but there is independent research out there to illustrate just how many problems can occur if a recruitment process goes wrong.

The Supper Club, an independent network of business people, quotes a CIPD figure that suggests the cost of replacing a single underperforming employee is £4800 and can spread over nine weeks. And as the employees become more senior the cost moves upwards, and of course the costs of the recruiter increase too. Training and management of underperforming employees also become an issue.

The Supper Club also points to the invisible problems caused by poorly chosen recruits, including sapping the energy of others and potentially causing a culture of underperformance to become the norm. Backing this theory up, research from totaljobs has found that a remarkable 34% of the workforce have seen a colleague lose their job due to poor performance and absenteeism.

Other independent research has come out with some positively frightening numbers.

In late 2008, the UK’s SMEs were shown to be wasting £69m on poor recruitment decisions, which at the start of the recession would have been even less comfortable than it would feel now.

And it wasn’t just SMEs making a loss from bad hiring decisions, an earlier report from the previous year suggested that all employers were squandering £5bn a year on recruitment that went wrong.

What can you do about it?

The remedy is of course to choose the right people, starting with those in the HR jobs who will be filling in all the other positions. You’re looking not only for established competencies and skills in a potential employee, but also a willingness to learn best practice.

So how do you make sure the candidate has those skills? A good interview question would be “What have you done differently after a particular learning that’s really helped your last employer?”

It’s also important to look into and understand your own organisation. The best candidates will look for companies that will nurture and allow them to flourish rather than spoon-feed them and stay resolutely old-school. In fact nearly 50% of job seekers prioritise the opportunity to train and learn when looking for a new role.

Ideally you should ensure your recruitment partners are briefed to the hilt to avoid recruiting the wrong people. The opportunity costs can be far reaching and very expensive. And if bad placements do happen, try to use it as a chance to learn something about the process – and ensure it doesn’t happen again.

Guy Clapperton is an expert for HR and business related topics and writes for Guy has written for well-known publications such as the Guardian, Financial Times, Forbes and broadcasts occasionally on the BBC.

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