How Much Is That Bad Hire Really Costing Your Business?

How much does a bad hire cost?

The average cost of hiring the wrong employee is $17,000, according to research by CareerBuilder. Similar research from Northwestern University found that a bad hire could cost a business $15,000 on average. Those numbers increase along with the role as well, so higher-level positions could end up costing you even more.

These costs are associated with onboarding and training, lost productivity, disruption to workflow, and employee turnover. These costs aren’t just about wages and salaries, but the time and effort it takes your team to clean up after a bad hire and ultimately find a suitable candidate to replace them. 

That means making the right decision the first time is essential, but how can hiring managers be sure they’re bringing on the correct people?

How to avoid bad hires

Conventional hiring methods follow a simple process where candidates apply based on a vague job description, several are chosen for interviews and eventually one is selected. But often what seemed like the right fit quickly becomes a hiring error. Rex Conner, human resources consultant and author of What If Common Sense Was Common Practice in Business?, said the fix is simple: Reduce subjectivity in the hiring process.

“The biggest obstacle to hiring the right people, onboarding them, training them, evaluating and developing them is subjectivity,” Conner said. “We end up with these ridiculous conversations where an interviewer asks, ‘What’s your biggest weakness?’ and (the response) is ‘I work too much.’ That doesn’t tell you anything about the skills required.” [Read related article: Soft Skills Every Tech Professional Should Have]

Given that CareerBuilder found nearly 60 percent of bad hires occurred because the employee could not produce the level of work required by the employer, understanding the skills needed at step one is imperative to avoiding a hiring disaster. Conner offered the following advice for those rethinking the hiring process in terms of demonstrable abilities and objective measurements of candidates.

1. Develop and articulate two sets of skills: prerequisite and trained.

Prerequisite skills are those that a candidate should come to the interview prepared to demonstrate. These skills are required for the job, and new employees will not be trained in them. They can be as general as prior newsroom experience or as specific as expertise in an audio engineering software program. Trained skills are those that will be learned on the job; some prior proficiency is desirable but not necessarily required.

2. Reduce the chatter in interviews.

Make the interview more about asking the candidate to demonstrate their prerequisite skills than asking open-ended questions that ultimately give you little insight. For example, “What experience do you have coding in this language?” tells you more than “What do you do when conflicts arise at work?” Once the skills have been demonstrated, ask those other questions if you’d like, but there’s no sense in using them on someone who cannot demonstrate an ability to do the work.

3. Make subjective soft skills objective.

Qualities like “cultural fit” and “team player” are somewhat subjective; every company defines “team player” slightly differently. Conner recommends breaking these soft skills down to their components. Exactly what do you look for in a team player or in a cultural fit? Name those qualities to make them concrete, and then ask yourself if you see those traits in your candidate. Ask interview questions that help you see these components in your candidates too. [Read related article: 6 Interview Skills That Will Get You Hired]

4. Narrow the list with job requirements.

Getting candidates to whittle down your list for you is key. Post the job’s requirements, such as “willing to work weekends” or “willing to travel.” Another great option, if applicable, is “willing to work nights.” Any potential candidates unwilling to abide by these requirements will not make it through your door for an interview, thereby saving time and money and reducing the risk of making a wrong hire.

5. Figure out what went wrong last time.

Chances are you’ve made a bad hire once or twice before. The mistakes you made then can inform your current selection process. If the bad hire lacked certain skills key to success, ask objective questions about those aspects of the job. If the bad hire worked too slowly to meet your output needs, ask all your candidates how long certain key tasks take them. Weigh your candidates against one another on these fronts to find a good new hire.

6. Ask for references and be sure to contact them.

A job candidate can come into an interview boasting about a skill set only to drop the ball once they’re actually on your team. Avoid this catastrophe – and a bad hire – by seeking recommendations. These reference checks can tell you the real deal behind a candidate’s story. The people you contact will often be candid with you, as they know you won’t tell the person what they say.

7. Don’t rush your hiring process.

Being deliberate when filling an opening is a great way to avoid the cost of a bad hire. Your team might be thinly spread with one fewer employee than usual, but a bad hire isn’t a solution to that. While a quick hire may temporarily alleviate your problems, it may ultimately put you back at square one. Take your time and avoid a costly bad hire.

8. Be subjective only if you’re stuck.

At this point, Conner said, you’ve got all you need to decide. If two candidates are deadlocked after you have assessed their skills, determined their level of coachability, examined their soft skills and explained the job requirements in detail, subjectivity still serves.

“If we start not by identifying all the job requirements, but just by identifying the specific skills a person needs on the job … the focus of the recruiting process becomes finding someone with those specific skills,” Conner said. “You’re saying, ‘We need you to perform this task to this level and this standard, and if you can do it, then you qualify.’”

Improve recruiting and hiring processes to avoid bad hires

If you’re worried about bringing the wrong person into your company, start by examining your recruiting and hiring process. If there is a lot of room for subjectivity in your existing process, revamp it so there are more objective measures of what a successful candidate looks like. That way, you give your hiring managers the tools they need to find the right people, without asking them to make a call on their own. In the end, taking these steps can save you a lot of time, money and frustration.

Max Freedman contributed to this article. Some source interviews were conducted for a previous version of this article.