Bad hiring decisions have a high cost

To confirm a simple truth, in most businesses the biggest single cost are people. If you hire poorly you will incur ongoing costs to the business that could cause it to fail. Alternatively if you hire well, retain the people and invest in them to increase their skills, they will help you grow the business over many years.

Costs associated with poor hiring decisions are always significant and estimates range from an absolute minimum of the annual package value to 10 times the APV when a poor hire is retained and damage occurs over many years. As the business owner/CEO you may not directly see all the costs associated with every new hire. Here is a list of potential hiring costs applicable for most businesses. As you can see most are “hidden” by your current labour costs:

  • Preparing role descriptions, interviewing time, recruiter and advertising fees
  • Candidate assessment tool fees, staff debriefing time
  • Induction planning, training, one on one meetings, other staff time
  • Direct monthly employee compensation and on costs over the term of employment
  • Mistakes made by the employee, rework, lost opportunities, potential lost customers
  • The impact on other staff, other staff leave and potential damage to good culture
  • Disruption costs when removed
  • Severance costs or legal fees
  • The cost of worry (no $ value) and regret

So when you consider the high costs and pain of making poor hiring decisions what are you going to do this year to improve your recruitment skills and process? If you need any assistance, call Better Managers


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