Most managers like to make decisions quickly and might not feel that it is necessary to get help. You might be asking: is it really that expensive if you made a bad hire?
Let us evaluate what is the cost of a bad hire.
The accepted estimate for the cost of a bad hire is 1.5 to 3.5 times the salary of the job in question, after all costs are factored in. These costs can include, among other things:
o Interview time
o Reference checking time
o Manager training time
o Lost profit margins
o Potential customer problems
o Staff problems with low morale and / or having to replace an employee in the middle of an assignment
The Bureau of Labor Statistics estimates that it costs at least $ 14,000 to replace one employee.
Have you ever stopped to figure out exactly how much time you have to invest in hiring an employee? Activities like screening phone calls, reviewing resumes and arranging interviews can be very time-consuming.
By filling in the following "Hiring activities" chart, you will develop an accurate estimate of how much time you spend locating a suitable individual.
Hiring Activities – Hours Devoted
Developing position specifications (job description,
compensation package, etc.)
Writing, laying out and placing ad
Screening phone calls (how many phone calls
may you receive to an ad?)
Receiving and scanning resumes (how many
resumes would you wade through to find a few good ones?)
Reviewing resumes (what is the criteria?)
Developing a short list of possible candidates
Arranging interviews (how many first interviews
would you need to schedule?)
Conducting first interviews (Is there a script?)
Developing a second short list based on interviews
Arranging second interviews
Conducting reference checks
Extended an offer
Sending rejection letters
Other recruiting and hiring activities
Apart from the traditional costs of a bad hire, which include recruiting costs, training investments, and supervision coaching time, a bad hire in a customer contact job will have a direct impact on customer retention. Customers who are ill-treated will leave and go to your competition.
This estimate of the real cost of a bad hire does not even take into account costs which are extremely difficult to calculate, such as:
o The negative effect on co-workers' productivity and morale.
o Lost business and opportunities due to mishandling by the employee.
o Unemployment compensation, severance pay or legal fees.
o Recruitment and training costs which you must incur again to replace the employee.