“I am convinced that nothing we do is more important than hiring and developing people. At the end of the day, you bet on people, not on strategies.” - Lawrence Bossidy, GE
An organization’s legacy is shaped by the people who work in it. The decision to hire people, hence, carries lots of significance for any organization. The hiring decisions ultimately reflect in the company’s performance, both short term and long term. A candidate who is not aligned to the organization’s value system, vision, work culture, role requirement, or competence requirement, can potentially contribute to the failure of the organization. Other than the direct visible impact on the functional performance of a team under their influence, bad hires have a significant additional undesirable implication as well. For example, wastage of time, effort, energy, resources, and the opportunity loss of a possible good hire. A bad hire, in many situations, also leads to loss of brand image, both internally and externally, as well.
Let’s take a closer look at the actual cost of making a bad hiring decision.
The actual cost of hiring the wrong employee
Productivity loss: A bad hire would typically resist and resent all forms of alignment initiatives, like performance alignment, teamwork, upskilling or coaching by the organization. They would also make things difficult for the team to deliver as a whole, and also creates challenges to operate with those who have to interact with them daily. The energy drain aside, productivity, and accountability are never respected, and the time allocated for doing business also gets affected, resulting in overall productivity loss.
Monetary loss: Apart from the monthly salary/stipend that the bad hire incurs from the organization, there is also an additional financial cost in the form of time, energy, and resources to train and bring them on par with the expected levels. The entire exercise of scouting for resources and having to let go of them because they did not deliver as expected, turns out to be a more significant drain on company costs. Additional costs as severance pay, replacement cost, including the time spent leaders in looking for their replacement.
Motivation loss: Putting in the time, energy, effort, and allocating resources behind a bad hire can be a very discouraging sight for those employees who exceed expectations and the internal team dynamics could get affected significantly. Especially if such a hire is coming in at a senior position, the subordinates will nurse a lot of resentment. Over time, the high performers will lose faith and trust in the leadership and the management and display dissatisfaction and gradual indifference. To remain self-motivated requires tremendous effort, especially when one lousy hire is bringing down the team morale.
A bad hire also ends up influencing the behavior of those around them, fostering negativity, and affecting the general work environment. More often than not, bad hires have had issues of getting along with their peers or managers, disrupting the general air of unity and bonhomie of a team. Their interactions with other departments within the company often suffer as well, leading to unnecessary conflicts.
Reputation loss: Today, most job-seekers check verified employee-ratings and anonymous feedback regarding the work culture and professional ethics of an organization before joining. A bad hire can bring about discontent among the other team members and could lead to the right people leaving the organization, owing to disappointment or conflict. This makes correcting perceptions an uphill task. Partners, external agencies, and stakeholders are bound to feel let down by the fact that the management does not care for the quality maintenance, leading to loss of trust and look to distance themselves from such brands. Good employees also doubt the organization or the management policies and question their competence if an incompetent employee is hired.
To conclude, organizations must put in efforts to hire the right candidate and ensure that adequate filters are in place to reject a possibly unfit employee. As discussed above, the impact of hiring the wrong candidate go well beyond the monetary loss alone and can lead to long-term consequences as well.