The true cost of businesses recruiting the wrong person for the job

In the build up to October’s Talent Management & Leadership Development Summit, James Callander, Managing Director of FreshMinds Talent considers why employing the wrong person could be more than just a financial burden to businesses…

In today’s competitive marketplace, businesses need to make sure they get value for money. Employing the wrong person for a role is a costly mistake to make.

The cost implications of recruiting the wrong person are extremely high: recruiting costs a company approximately 25% in basic annual salary of the employee, plus the cost of time spent interviewing the candidate and then the cost of making them redundant.

Add on the internal time taken to cover the assessment of the poor hire and decision-making over an exit strategy –which is often expensive senior-level time. This is acute in small businesses or start-ups, where senior management time is business critical. Once the bad hire has been resolved, the recruitment process has to be repeated, incurring more cost and internal time. Any training and development spending on the outgoing employee will also be lost.

In terms of other costs to the business, it is easier to see the cost of hiring the wrong person if they are revenue generating, as you can compare their performance to the rest of the team. In top tier professional services such as consultancy, where we work extensively, the failure to sell can be very serious. In other roles such as in-house strategy teams, where we also operate, the cost can be less easy to identify and is related to lost opportunities either to develop the business or to save costs.

This is why it is even more important to invest in the recruitment process up front – much like doing extensive and high quality due diligence before a business deal.
Not only does employing the wrong person have serious financial implications, but it can also have an impact on the organisation as a whole. This is particularly apparent when recruiting for senior or team leader positions.

A spate of leavers from a team often follows from a bad hire if the personality fit is wrong. This can do long term damage to the morale of the team or business.

So what do businesses need to think about to ensure they recruit the right person? Before companies begin the recruitment process, it is important to undertake a thorough evaluation of what qualities and skills are required of a new recruit.

To do this, you need to begin by asking some key questions:

• Why do we want to recruit somebody?
• What’s the purpose of their job?
• What are their main duties going to be?
• And how will that fit in with other people in the organisation?

You also need to be able to measure and evaluate a potential new recruit’s skills effectively. The most common mistake companies make when interviewing is to rely too much on gut instinct. Subjective opinion will inevitably play some part in the recruitment process – we are all human – but this should be underpinned by a comprehensive, objective assessment of the candidate’s suitability and their skills across the entire performance spectrum.

If a company is clear on what factors make for consistently successful employees, that knowledge can be applied critically, enabling them to recruit to an objective benchmark moving forward.

Investment in the recruitment process and in skilled recruiters can help reduce poor hiring decisions. A good recruitment company will be able consistently to find candidates who add value to their clients’ businesses, which is something we really pride ourselves on at FreshMinds Talent. We also take time to understand company culture, values and environment to ensure a fit on that level as well.

The phrase about people being a company’s biggest asset may be a great cliché, but it’s still not understood by all. Underinvestment in other crucial assets such as technology or machinery would be seen as poor commercial decisions, so why would businesses not invest in recruitment and recruitment processes? If it’s a cost issue in terms of either internal time or recruitment fees, it’s worth remembering the housewives’ adage “buy cheap, buy twice”.




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2 Comments - Write a Comment

  1. Getting it wrong when hiring staff can be very costly indeed. The CIPD put a cost of x2.5 salary paid. However in reality this pales into insignificance when you evaluate the risk of damage to your employer branding and reputation. How many times have you had a bad experience when eating out and how many people did you tell about your experience (thought so!). It’s no different for leavers when dismissed or resigning from employment on the back of a poor recruitment process. All too often, no thought is given to who conducts interviews, the questions asked, the competencies required for the job and the culture fit of the employee in the team in question. In short, getting the basics right! Employers should invest in a robust recruitment policy, train managers in this, implement interviews skills training for those people tasked with finding and selecting new talent and finally don’t forget good old fashioned gut-instinct as well when hiring employees.
    http://www.geniushr.co.uk

  2. Hi James,

    You are right , but what about the emmployee who got recruited is the any policy , And how can that employee move forward with his carrier .

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