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The cost of a bad hire goes beyond money

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by Tacy M. Byham, Ph.D. and Richard S. Wellins, Ph.D.

angry boss and sleepy employeeThe late management guru Peter Drucker said, “Of all the decisions a leader makes, none are as important as the decision about people.” He wasn’t wrong. When the right people are in the right jobs, performance soars. The conversations you have with your team become rich and meaningful, and your company—and everyone who works there—benefits.

As one leader put it, “The key to my success is hiring people far better than I am.”

The intent is spot on. But the truth is, most people don’t know how to identify and hire the better people they need.

In a study of hundreds of hiring managers, we found that almost half of managers spend less than 30 minutes deliberating each hiring decision—less time than it takes to deliver a pizza or watch a favorite television show.

Amazingly, 44% rely on gut instinct to make a decision. And over 50% have never had any formal interview training.

There are lots of reasons why this matters. Conservatively, a wrong hiring decision can cost a company three times the person’s salary. Other sources have calculated the cost of a bad hire at 24 times the position’s base salary.

But a bad hire has other high costs, and not just monetarily:

• Your credibility and judgment may be called into question by your team, peers, managers, partners and customers.

• The new hire is likely to be unproductive, inefficient and unengaged. If the person does not show up for work, he may be unable to meet his goals. This is a leadership emergency.

• You’ll burn time, energy and money involved in hiring and onboarding a replacement.

• And if you can’t find a replacement, leaving a position vacant for months can be a nightmare to manage. Who will do the person’s work?

• You face potential damage to customer relationships and brand image, especially if your bad hire worked directly with clients.

• Your team struggles to fill the gaps left by the poor performer and does damage control with internal and external customers.

• Firing someone is always a legal issue. Labor laws are complex. You’ll need to spend a lot of time understanding how the federal laws and your state laws come into play every step of the way.

 


Tacy M. Byham, PhD., is the CEO of Development Dimensions International. Richard S. Wellins, PhD., is a global expert in leadership development. They are co-authors of Your First Leadership Job, www.YourFirstLeadershipJob.com.

 

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