5 Actionable Strategies for Reducing the Cost and Impact of a Bad Hire
Written by HRCap, Inc.
July 13, 2022
It has become increasingly harder to retain talent than hire talent.
Among 600 US companies with 50-500 employees, 63.3% have more difficulty retaining employees than hiring them according to Zenefits. Although this does not sound like a big problem, bad hires are financially costly to a company. In fact, according to the U.S. Department of Labor, the average cost of a bad hire is up to 30% of the employee’s first-year earnings. Jörgen Sundberg echoes that the cost can be as much as $240,000 in underlying costs that go into recruiting, hiring, and onboarding.
A bad hire can also have a negative impact on the organization’s team by reducing team morale and productivity, and ultimately work output. Companies continue to invest in best hires but despite incorporating best practices, 95% of companies admit to recruiting the wrong people each year.
Companies must first identify the underlining factors for a bad hire to create a sustainable solution.
Why Bad Hires Happen
1. Lack of Qualified Candidates
Recruiting the right hire can be challenging when there are not enough candidates that are interested or qualified. Even though there are many qualified professionals, companies may find it hard to get candidates interested in applying for their company.
According to the 2020 Harris Poll survey, 40% of 1,005 U.S. hiring decision-makers say they cannot find qualified candidates.
2. Faulty Interview Process
A 2015 study by Brandon Hall Group found that 69% of companies identified having a flawed interview process which greatly impacted the quality of hire. Some things that contribute to a flawed interview process are not having a structured interview, not asking the right questions, not holding multiple interviews, and not being consistent. The same research shows that organizations without proper interview processes are 5 times more likely to make a bad hire.
3. Compromises Made Due to Urgency
In a 2012 CareerBuilder survey, 43% of companies responded that bad hires happened because they felt the need to hire someone quickly. This happens mostly for replacement positions with no readily available backfills in the organization.
Hiring managers often feel pressured to fill the gap for business continuity and may not take the proper steps to hire the most qualified.
4. Bad Timing and Slowed Response
On the flip side, many hiring managers also take too long to respond to a qualified candidate, which results in the candidate losing interest or taking another opportunity. In a Robert Half survey of 1,000 U.S. workers, 57% of job seekers lose interest in a job when the hiring process is too long. Hiring managers need to understand that the current market is extremely robust and there are more jobs available than applicants available.
5. No Formal Background Check
The majority of employers conduct background checks for every new employee before hiring them, but 28% of employers still do not.
Background checks may uncover false information on resumes regarding professional work and formal education and any previous criminal record that needs to be carefully reviewed. In various industries, background checks are legally required for compliance.
6. No Professional Reference Check
Companies also need to go the extra step of conducting professional reference checks to validate the strength of expertise, experience, and work ethics. Applicants can be strong interviewers and may oversell their strengths and fully hide their weaknesses. In fact, according to a 2017 CareerBuilder survey shows that 75% of HR managers report having caught falsified information on a resume. Making better-informed hiring decisions using various data points is crucial to making a best-fit hire.
7. Poor Onboarding Experience
Many employers invest in finding and hiring the best-fit candidate, but may even lose candidates due to a lack of a strong onboarding program. Weak onboarding processes cause employees to become heavily disengaged and unproductive. According to CareerBuilder 2017 study, 16% of HR managers said a bad onboarding program decreases the company’s productivity and 12% said it leads to higher employee turnover.
How to Improve the Hiring Process
As such, it is critical to focus on hiring the right candidates from the get-go. Below are five actionable strategies to improve the hiring process to help save the organization from making a bad hire.
1. Improve Corporate Brand Awareness
Companies with stronger brand awareness can attract more qualified candidates who are genuinely interested in working at the organization and growing with the company. A Glassdoor survey shows that 40% of candidates are more likely to apply for a job if they recognize the company brand compared to a company they are not familiar with.
2. Promote Employee Referral Programs
Employee referrals can expand the pool of potentially qualified and already vetted candidates. This significantly reduces the amount of time and resources spent on advertising open positions and sourcing for the right candidates. Employee referrals also actively engage the current employees in the hiring process which allow them to feel greater ownership and engagement with the organization.
Furthermore, 46% of new hires that were referred stayed for one year or longer, while 88% of employers rated employee referrals the best for improving the quality of new hires.
3. Enforce Thorough Interview Processes
HR leadership must formally train hiring managers and interviewers to be consistent and thorough in the interview process. Hiring managers need to ask the right questions for screening interviews, behavioral interviews, and technical interviews. They must also carefully review the job description and role expectations so that every interviewer and even the candidate can be fully aligned.
By understanding what skills and qualities the team is looking for, interviewers know which qualifications to look for in the right hire. They also need to identify which team members and executive teams to engage in the interview process for multi-level screening for fit.
4. Conduct Both Background and Reference Checks
Background and reference checks are a must. Both checks will help to confirm and validate what the candidate has presented in their applications and interviews.
In the 2012 HireRight Employment Screening Benchmarking Report, 67% of employers have improved their quality of hire due to background checks. 70% of employers that have done background screening have also reported uncovering false information.
Employers can best verify the candidate’s work experience, gauge their work ethics, and see if the employee is the right fit through an effective reference check.
5. Initiate Onboarding after Offer Acceptance
Companies often believe onboarding begins on Day 1 of employment. Rather, it must begin as early as when the candidate signs the offer letter. With the current job market, many candidates withdraw even after accepting the job offer, if there are stronger opportunities at competing opportunities. 83% of high-performing organizations began onboarding prior to the new hire’s first day on the job.
Many companies send welcome packages to the recruit or initiate matching mentor buddies prior to the start date. By taking intentional steps to include the new hire immediately from offer acceptance, organizations can better secure and retain candidate interest.
After the actual start date, employers should hold orientations and schedule clear, practical objectives over the course of the onboarding to engage new hires. A strong onboarding process can improve new hire retention by 82% and increase productivity by over 70%.
Bottom Line
Companies need to fully engage the organization and invest in hiring the right candidates without cutting corners. Even when it is an urgent hire, employers should take their time in finding the right hire and take the proper steps in the hiring process.
However, even with the proper steps and adequate time, companies still face difficulty in finding the best-fit candidates and keeping them fully engaged in the hiring process. As such, companies may further invest in engaging and partnering with a recruiting firm to improve the quality and speed of best-fit sources and enhance the candidate recruiting experience.
HRCap is an executive search firm that has been recognized as the “Top 10 Executive Search Firm in 2022” by Manage HR. We partner with companies to find the best-fit candidate for urgent replacements, critical newly created positions, confidential succession planning, and even proactive recommendation for projected new positions based on industry trends.
Our global recruiting expertise is proven through our success rate of above 92% for all our VIP clientele. If you are committed to making the right hires, consider partnering with HRCap today!
Resources: HRCap, Brandon Hall Group, Business News Daily, CareerBuilder, Fast Company, Glassdoor, The Harris Poll HireRight, SHRM, Undercover Recruiter, US DOL, Zenefits
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