As a business coach for high-growth companies, I work with organizations that are often starving for talent and under a lot of pressure to grow quickly and make hires fast. However, without truly understanding the costs of making a bad hire, many companies fail to ask the right questions or take the right precautions in their recruiting and interviewing processes.
Here are a few of the considerations you need to keep in mind when designing your strategy and process for making new hires. Putting in steps to assess and evaluate these risks will serve you well to make sure you’re making the right people decisions as you grow.
1. Wasted investment in hiring
The first obvious consideration is the time, energy, and money you put into hiring. If you’re using a search firm you could be spending upwards of thirty percent of a first-year’s total compensation to make a key hire. For most companies, this isn’t chump change. But even if you’re doing your own search and recruiting, you’re still spending real dollars and significant time on the hiring process.
2. Onboarding effort
While making the hire takes time and energy, most companies end up spending just as much, if not a lot more, training and onboarding new people. This includes the time your new hire is spending learning the ropes, getting up to speed on projects, learning your software systems, and generally acclimating to the new environment. Even the most experienced and skilled person will need time to become productive.
And don’t forget all of the time and energy your current employees will be spending getting your new hires up to speed. At a minimum I double the time of the new employee; and in some cases that could be two or three times the work effort. If you’re spending hard dollars on training and certifications, then that’s money you’ll never get back if they don’t work out.
3. Team disruption
While it’s difficult to quantify the hard costs of team disruption, the productivity drag of a new person on a team is very real. A well-oiled team will be thrown off by a new member and it will take a while for the team to find its new groove.
Some of this is about process design and roles on the team that need to be adjusted. Rebalancing workloads and reassigning projects and clients will take time and a thorough thinking through. There are also changes to the team dynamics and communication structures that will need to be reestablished and optimized with the new players.
4. A-player disengagement
One of the key costs of a bad hire has nothing to do with the hire themselves, but rather their impact on the rest of the team. If you hire someone who’s not a good fit or who just can’t pull their weight in the role, it will be a drag on the rest of the team. As a result, your current high performers will suffer and become frustrated.
A-players want to work with other A-players. And if they feel like they need to tolerate and pull extra weight for the underperforming team members, they will quickly disengage. Ultimately, one of the biggest costs of making a bad hire is causing one or more of your best people to leave the business.
Finding and developing A-players is very, very expensive and you should be protecting them at all costs. The last thing you want to do is suffer the costs of a mis-hire and also lose a great employee.
5. Poor reputation
If a company consistently does a poor job of hiring and cycles through candidates quickly, word will get out. With sites like Glassdoor.com and social media combined with people’s willingness to openly share their hiring and employment experiences, companies are highly exposed and vulnerable to developing a bad reputation.
While potential candidates will write off one or two bad reviews in a long list of positive ones, if they see a trend of companies letting people go quickly, they will think twice. Nobody wants to leave a job, even a bad one, to work for a new company if they are worried they will be on the street again in a matter of months.
Hiring is not easy and you’ll never get it perfect. But don’t take the job lightly and don’t assume you can just hire someone and hope it works itself out. The direct and indirect costs of making the wrong decision will ultimately cost you more than what it would take to develop a clear strategy and effective hiring process.