By Michael Cormier
From time to time, I’ve mentioned the costs associated with bad hiring. Lower office morale, theft of goods and/or services, poor production, even lawsuits are some of those costs. I think we can all agree that a bad hire can have many consequences, ranging from a simple nuisance to a major crisis.
But what exactly do these consequences add up to in terms of dollars and cents? After all, in our modern economy the bottom line is everything. Sure, peace and sanity in the workplace are important, but in this age of shrinking profit margins, it’s only one of the reasons to be careful about who we hire.
Good background investigation companies, such as The Hire Authority (508-230-5901; www.hireauth.com), do a lot more than expose bad eggs that can potentially bring a company to its knees. Hire Authority is there to help in every phase of choosing an employee that’s a good fit. And what I mean by “good fit” is an employee who will not only do the job and do it honestly, but will not become a disruption to the everyday work environment.
Studies have shown that poor hiring decisions account for huge losses every year, especially in small- to mid-size companies. One recent government study showed that employee turnover costs the American economy about $300 billion annually—and not just through poor productivity, but through additional attention devoted to recruitment, hiring, training and management, as well as the time spent searching for a replacement—costs that can be termed indirect.
But that’s not all. We already mentioned office morale as one of the intangibles a bad hire can cause. But consider what the eventual firing of that bad employee can do to others in the company. Valued employees may question management’s competence, which not only affects morale, but may even lead to good employees leaving the company to go with what they perceive as a more competent employer. Hence, even more hiring costs.
Now, what about the direct costs of bad hiring decisions? Direct costs include things that can be easily quantified in dollars. For example, there are the costs of advertising the job opening, or paying a recruiting agency. A signing bonus may be paid, or relocation expenses reimbursed. Then there’s the cost of training the new employee, which may involve fees paid to an outside trainer. When firing time inevitably comes around, there might be a severance package due, and the company’s unemployment contributions may go up, too. Finally, if the employee decides to bring a lawsuit, expect big lawyer’s fees and possibly a court award.
It can really add up. It doesn’t matter how big or small your company is; many of these costs apply across the board. A recent CareerBuilder survey showed that 27% of U.S. employers had lost a minimum of $50,000 because of a single bad hiring experience. That’s a huge chunk for a smaller company. But don’t think larger companies don’t feel the pinch, too. The CEO of Zappos, Tony Hsieh, once estimated his company had lost over $100 million due to bad hiring.
If that isn’t enough to convince you, here’s one more statistic to consider: The Harvard Business Review has estimated that 80% of employee turnover resulted from poor hiring practices. In other words, it’s not just a matter of a bad candidate slipping through the cracks; the employer is just as guilty for not getting the job done right.
Which is not to say that all you HR people out there don’t know what you’re doing. Au contraire! It’s really a matter of understanding what resources you have, and knowing when to bring in outside help.
And that brings us back to the matter of bottom line. How much is your company prepared to spend in order to hire the right employee? Maybe the better question is, how much can your company afford not to hire the right employee?
A background investigation service like The Hire Authority (508-230-5901; www.hireauth.com) can not only check a candidate’s criminal and credit histories, they will thoroughly—and legally—check his references, employment history, and educational background. Just as important, they know how to do this in such a way that you can be confident you have a well-rounded picture of this candidate before hiring him.
That’s money well spent. Because that ounce of prevention can make all the difference between choosing an employee who will add to your bottom line and not subtract from it, which is what it’s all about in the modern world of hiring.
So protect your company’s bottom line by calling The Hire Authority at 508-230-5901 or visiting their website at www.hireauth.com today.
The foregoing should not be construed as legal advice. Employers should always consult their own legal counsel for advice on labor and employment matters.