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The real cost of bad hiring decisions

Marie O'Sullivan
Person at computer in coffee shop

We often talk about and arrive at figures for the Cost-per-hire (CPH) at the risk of distracting ourselves from ‘Quality of Hire.’ Perhaps an analysis of the economic impact of ‘bad hiring’ decisions will refocus our attention as we embark on our 2016 recruitment drive. A Career Builder survey found 42% of companies reporting that a bad hire cost them at least $25,000, and 25% reported a loss of at least $50,000. A tracking study by Leadership IQ found that 46% of 20,000 new hires failed within 18 months. Of the new hires, another 45% were only fair to marginal performers, meaning that 81% of new hires are a disappointment.

The Cost of Bad Hires varies by Country

The findings of the 6,000 hiring managers and human resource professionals in the Career Builder survey found that the single lousy hire costs varied by country, for example:

  • U.S.: $50,000.
  • Germany: €50,000 ($65,231).
  • U.K.: £50,000 British pounds.
  • India: 2 million Indian rupees ($37,150)
  • China: 300,000 CNY ($48,734).

In an article in Fast Company, Rachel Gillett wrote about Zappos CEO Tony Hsieh, who offers new hires $2,000 to leave the company and his hiring policy slowly and firing quickly. Hsieh maintains his past bad hires have cost his company over $100 million.

The Career Builder survey found that the costs could also be higher between lost worker productivity, time, and expense in recruiting and training another employee, not to mention the negative impact on employee morale and the client relationship. 21% of companies admitted that they hired poorly because they didn’t take the time to test and research the employee’s skills properly. For more insight into the cost of a bad hire and what you can do to avoid it, Mindflash has very conveniently produced this infographic of the Career Builder survey’s key findings.

This article was created by Sonru Video Interviewing and may include contributions and research gathered from Sonru clients and candidates between 2011 to 2020.