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What is the true cost of a bad hire?

The True Cost of a Bad Hire (and how to avoid them)

The cost of recruiting, hiring, and training a new employee can cost a business anywhere between R30,000 – R60,000, and an average of 28 days to fill the position. The wasted resources in terms of time and money are rarely considered by recruiters and hiring managers. It is precisely for this reason that businesses need to ensure that they hire right the first time around – but how is that accomplished, especially granted that 3 in 4 employers admit that they’ve previously hired the wrong person for the job.

According to the US Department of Labour – it is estimated that the true cost of a bad hire equates to around 30% of that employees first-year earnings. To make matters worse, a poor performing employee can cost managers an estimated 17% of their time. This equates to almost a full day of lost productivity PER WEEK for the manager. For smaller organisations, this can seriously hurt your bottom line.

Besides this, some other ways a bad hire can cost a business include:

  • Recruitment fees
  • Training costs
  • Lost time supervising a bad hire
  • Lost productivity
  • Lost clients
  • Damage to brand image and reputation
  • Damaged employer reputation
  • Loss of trust, synergy and teamwork

All of these things involve a cost in resources, and all of them can be avoided! Some of the ways in which you can spot a bad hire in the pre-employment phase:

  • They know very little about the position that they’re applying for
  • They failed to research and understand the company they’re applying to work at
  • They’re late or completely miss their interview
  • There are unusually long delays in communication prior to their interview

While this could help a well-trained hiring manager identify a red flag, it is hugely reliant on assumptions, which can be misleading. In our digital age – the use of data in decision making has become more and more important, but in order to benefit from the data, organisations need to have access to it, as well as know how to leverage it. The data being referred to is in the form of Social  and Digital Media Background Checks – which have been proven to help hiring managers and recruiters identify high performers whilst weeding out the bad hires in the pre-screening phase.

Statistics show that 46% of businesses lack access to the right information at the right time to support decision making, analysis, or planning requirements. The issue here is that the vast majority of recruiters, hiring managers and decision makers aren’t even aware of the benefits that come as a result of incorporating Digital Media Checks into their recruitment process. A good way to summarise this, is with the 4 stages of data-decision adoption;

  1. Data Denial – Businesses who distrust data and avoid using it
  2. Data Indifferent – Businesses who don’t care about data and have no need for it
  3. Data Informed – Businesses that only use data when it supports their opinions and decisions
  4. Data-Driven – Businesses who use data to shape and inform all their decisions

At it’s core, a bad hire is the result of a bad decision. Bad decisions can be avoided by making more informed decisions, which are a result of well-trained hiring professionals who are equipped with the right tools. This is where recruitment technology and data-driven decision making are so critical.

Farosian’s Social and Digital Media Background Checks provide unparalleled insight into a potential hire. Not only can they shed light on red flags, but they can also help hiring managers pinpoint high performers. Farosian takes a holistic approach to background screening, highlighting any red flags but also taking into consideration the positive traits expressed by a candidate, which includes behavioural traits.

To put things into perspective, Farosian compiled data from 9708 candidates who were in the in the hiring phase and moving into new jobs, and had their social and digital media profiles screened – the results were staggering.

Complaints Data:

The chart below shows that 61.53% of complaints were from high risk candidates, the interesting part, is that the high risk candidates only consist of 38% of all candidates. Essentially, this means that 38% of data subjects accounted for 61% of complaints received.

Disciplinary Data:

In terms of disciplinary data, low risk candidates came out with an average score of 1,73 while high risk candidates had an average score of 3,11.

Performance Data:

Performance wise, high risk candidates had an average performance score of 67.15% while low risk candidates showed a performance rating average of 93.38%!

Tenure Data:

This is where it gets interesting though – in terms of tenure, which is a major reflection of whether a candidate was a good or bad hire, showed that high risk candidates who were placed had an average tenure of 5.82 months, and when you compare that to low risk candidates who had an average tenure of 17.25 months, it beomces evident that low risk candidates demonstrate 3X longer tenure than their low risk counterparts.

Recruitment Cycle Data:

Perhaps most surprising of all, data showed that the average recruitment cycle in South Africa was sitting at 28.4 days, but with the integration of Digital Media Screening, that time-frame was reduced to an average of 15.7 days. This goes to show the power of data-driven decision making!

What is clear, is that hiring the wrong person can seriously affect the productivity, profitability and development of your organization. The good news is that this is all avoidable.

If you enjoyed reading about these statistics and would like to know more about the practise of social media screening, make sure you download our recruitment paper for free. For more information about becoming a channel partner, or integrating this tool into your business, give us a shout: