What are the real costs of a bad hire?

Do you feel like you are ahead of the game of dollars and cents when you decide to “NOT” use the services of an Executive Recruiter in your recruiting and hiring plans? You may realize why bring a third party into the situation and pay a fee, but have you ever really looked at the costs involved when your “chosen hire” doesn’t work out?

Numbers related to the costs of a bad hire vary, but here are some estimates from various sources. According to Recruiting Times, “It costs $7,000 to replace a salaried employee, $10,000 to replace a mid-level employee, and $40,000 to replace a senior executive.”
The US Department of Labor estimates that the average costs of a bad hire can be “equivalent to 30% of potential first-year earnings.”

According to a presentation titled, Recruitment and Selection, from the Society for Human Resource Management, “Replacing supervisory, technical, and administrative staff can cost anywhere from 50 to several hundred percent of an individual’s salary.”

A quick calculation using Automatic Data Processing’s (ADP) “Bad Hire Cost Calculator” revealed these results based on an employee earning an annual salary of $40,000 with no relocation costs:

“The total cost of mishiring an employee earning $40,000 a year is $53,171.15”

The fact is that the costs of a bad hire will vary from company to company and situation to situation; However, there are “direct” costs that you can measure, such as an employee’s salary and benefits, and “indirect” costs that are difficult to measure, such as lost productivity, lost time of other managers or employees involved in the process. hiring process, and/or the time spent training a bad employee.

So while you may view paying an executive search recruiter fee as an unnecessary expense, it could contribute to your company’s profitability in the long run.

Professional executive recruiters can prevent your company from wasting money on a “bad hire” by using their experience in the field and access to the “top performers” in your industry. Most of the time, these “top performers” are already working and excelling in their current positions; however, an executive recruiter can help your company locate and attract them. Over time, when they turn out to be “good hires,” this gives you a return on your investment through their productivity and performance.

In addition, you make up for all the time you would normally spend on the recruiting and hiring process by performing tasks such as: writing a job ad and placing the ad, receiving and reviewing resumes to find potential candidates, scheduling interviews, organizing a “second” round of interviews, run background and reference checks, extend an offer…and if the candidate you hired doesn’t work out, start over, not to mention the lost costs of salary, benefits, training, and orientation from the “bad hire.” costs, the time you spend on interviews and the selection of the best candidates.
So while you think going it alone in the recruiting and hiring process saves you money…it can actually increase the likelihood of lost revenue. Partnering with a professional executive recruiting firm increases your chances of not only earning a return on your investment, but also increasing your company’s long-term profits by recruiting and hiring “high performers” who make the difference. difference in the results of your company.

**Find out the cost of a bad hire to your organization: “ADP Bad Hire Calculator”

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