How Much Does a Bad Hire Cost My Company?

March 5th, 2020

When engaged in a staffing process the end result for your company needs to be a great hiring decision. After all, just consider the costs spent sourcing, interviewing, and onboarding your preferred candidate. If they end up a bad hire, leaving your organization after a few months, the company takes a significant hit to its productivity and bottom line. 

With an eye towards understanding the importance of “the right hire” let’s analyze the cost to your company of making the wrong hiring decision. Leverage these insights to improve the organization’s staffing process to keep your talent pool strong. 

Quantifying The Cost of a Bad Hire   

When estimating the cost of a bad hire, the U.S. Bureau of Labor Statistics (BLS) provides some insights. According to the BLS, a wrong hire costs companies around 30 percent of their first year’s salary. However, some industry pundits feel the number is actually higher.  

For example, Tony Hsieh, CEO of Zappos, noted his company lost over $100 million on bad hires. Also, according to staffing expert Jorgen Sundberg, companies pay upwards of $240,000 to successfully onboard a new employee. Given those numbers, the overall cost of a bad hire causes significant pain to a company’s bottom line. For some smaller organizations, this might mean the difference between a profit or a loss at the end of the year, or even the viability of the business itself. 

This doesn’t even take into account any loss in employee morale and overall productivity due to a disgruntled employee. In short, a bad hire tanks the office culture and likely forces other employees to work harder to make up for any slackers. In this situation, making the right hire is absolutely paramount. 

Steps to Ensure Making The Right Hiring Decision  

To improve its chances of making the right hire, your company needs to consider these few strategies. First, use situational and technical interviewing techniques to gain insights into how the interviewee handles themselves in real-world scenarios when under pressure. This is also a great way to differentiate between candidates.  

Additionally, thoroughly check each reference for your top candidates. This ensures a candidate actually possesses the skills and experience detailed on their résumé. Also, work with your staffing agency to onboard tech professionals on a temp contract to see how they perform within your organization with little risk. 

If you need help building a great IT team at your organization, speak with the insightful group at Synerfac. As one of the top technical staffing agencies on the East Coast, we provide great candidates on a permanent or temporary basis to ensure you make the right hire. Schedule a meeting with us soon.  

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