The Payroll Blog

News, tips, and advice for small business owners

How Much Does a Bad Hire Cost?

Posted On
7/29/2019
By
Stephanie Davis

We have previously discussed the cost of losing an employee, but have you ever thought of the cost of a bad hire?

You are likely aware that hiring in general can get costly quickly, but making a bad hire can cost even more than that and can also have longer-lasting effects on your team. Keep reading to understand more about the costs associated when you hire someone who isn’t the best fit for your company, and how you can turn it around to prevent it from happening again.

Bad Hires and Other Employees

Employee engagement is one of the key components of a successful business. After all, employees who are engaged are getting more work done, care about the work they are doing, and truly care about the business and want it to succeed. When you have disengaged employees, their poor work habits can spread like an illness through your office and affect your hard-working employees. For example, if you have an employee who doesn’t ever do their work and forces other employees to pick up the slack, those “good” employees may eventually become resentful of their low-performing coworker and suffer from burn out from the extra work they are doing. On the flip side, employees may see one coworker doing nothing and getting away with it, and decide that they are going to do the same, which lowers productivity even further. When behaviors like this carry on for too long, your top-performing employees may decide to jump ship, which can leave you hanging as a small business owner.

Bad Hires and Customer Satisfaction

Depending on the type of small business you have, certain employee roles will have more of an impact on your customers than others. However, key indicators for small business success is online reviews and word of mouth, which means negative of either can severely impact business sales or in extreme cases cause a business to close. If you have an employee who isn’t doing their best work interacting with customers all the time, it could cause customers to decide to not return to your establishment. This is common in retail and restaurants, where your employees are the front line. However, back-end communications can also cause problems, particularly in sales and customer service. Your bad hire can make customers, and potential customers, turn on your business and bring down your numbers.

How to Prevent Bad Hires

You’re not going to get hiring right every time, but there are ways that you can improve the process so you end up making smarter choices for your business. We often say that it’s important to “listen to your gut”. Chad Biagini, Global Head of Sport and MD North America for Nolan Partners, wrote an article for Forbes about how when it comes to hiring, listening to your gut can cause more harm than good. A gut feeling is important to an extent, but it shouldn’t be the only factor in making your decision. Include other members of your team (when possible) during the interview process, conduct background checks, and follow through on the candidate’s references.

Bottom Line

With practice, hiring for your small business will get easier, but you’ll likely hit a few snags along the way. In the instance that you have made a really bad hire, it’s easiest just to rip the band-aid off and let them go quickly, instead of keeping them around hoping things will improve. If you’re hiring your first employee ever, there can be extra pressure to hire quickly, but remember slow and steady wins the race, especially in hiring.