When it comes to attracting new talent to your company, there are some obvious costs before you even find the right person, such as the cost of recruiting ads, hiring a professional recruiter or placement firm, as well as the costs of actually bringing that chosen candidate on board, including setting them up with an office space and paying for training.
However, there are also a number of indirect costs that need to be considered when you are drafting your hiring goals and these costs truly lay bare how expensive it can be when you hire an employee that isn’t a good fit for your organization or the job at hand.
When it comes to hiring a new face in the office, how many managers and colleagues are involved in the recruiting process from the beginning, including drafting or approving the ads, reviewing resumes, interviewing candidates, checking references, negotiating contracts concerning working conditions, salary and benefits? You will often find that the hiring process extends well beyond that of the HR department or even the department looking to add to their ranks, and when everything is all added up in terms of “billable” hours, the figure is likely to be fairly hefty.
It’s sometimes hard to determine how the addition of a fabulous employee (or a not so fabulous one for that matter) will impact the bottom line, but in business, it is important to remember that a team of people is typically only as strong as the weakest link. Therefore, even one “bad hire” could considerably impact your company’s bottom line.
Lost opportunity costs:
Again, let’s assume that you hire a dud employee (hey, it happens to all of us!). What lucrative sales contracts did the company lose because the under-performing employee made an error along the way? If the new employee was supposed to get a marketing campaign for a new product line off the ground but failed to deliver, how much revenue, either in whole or in part, has been lost as a result? Further, how much time did the wrong hire set you back and how long will it take you to recover from a financial perspective?
Morale and resulting turnover costs:
We mentioned above that departments or individual teams can only be as strong as their weakest link, but sadly this weakest link can also do a number in terms of decimating the morale of their coworkers. The resulting dip in morale on the star employees you wanted to keep can easily result in unwanted turnover and all of those associated costs.
While no one hopes to find themselves at the center of a lawsuit, the reality is that letting an employee go – even when the action is justified – can still leave you susceptible to lawsuits (however baseless and frivolous they might be!) The legal fees needed just to get these kinds of cases thrown out of court can be prohibitive, which is why companies so frequently opt to settle a case. Further, if the employee’s attorney is skillful enough to actually get the case before a sympathetic jury, you could be facing a verdict in the seven-digits, and that doesn’t even include the cost of the corporate attorney you hired!
With that being said, it is more important than ever to make sure that you are hiring the right type of candidates. Tune in to our blog next week, where we will share five common mistakes that can let a costly dud-employee slip through