The true costs of a bad hire, and how to avoid them

The cost of hiring the wrong candidate is a major concern among hiring managers—according to a 2016 CareerBuilder survey of 2,379 hiring managers, those who experienced a bad hire estimated the cost to be $17,000.

The consequences of poor hiring decisions aren't just financial—they can also reduce productivity among the rest of your employees, and negatively impact your company culture. These non-financial consequences may include:

  • Reduced productivity among more senior employees who must spend time to train and mentor the weaker employee
  • Lower employee morale which may result from an employee who is either not a good culture fit, or from having to fire employees
  • Additional time that must be spent sourcing and interviewing more suitable candidates

Below, we'll discuss some actionable advice you can incorporate into your hiring process in order to reduce your chances of making a bad hire.

Use background checks weed out bad hires

Interviews are a key component of the hiring process, as they help managers determine if a candidate is the right fit for a position on their team. However, many companies will find it beneficial to also include a background check to the hiring process. According to the 2016 CareerBuilder survey, 37% of those who experienced a bad hire claimed that the hire was ultimately unsuccessful because the candidate misrepresented their qualifications. Background checks can help you find out if candidates are lying about any of their past work experience, criminal history, or drug use, and sidestep any bad hires by weeding out unsuitable candidates before they end up on your payroll.

Make data-driven decisions to improve your hiring process

Many recruiting software systems enable recruiters to continually gather statistics about their processes, and analyze those metrics in order to form a strategy to recruit more successful candidates. For example, if the recruiting software shows you that your most successful hires are tied to employees' referral links on LinkedIn, you may decide that it makes sense to encourage your employees to continue sharing more job openings on social networks, since doing so has garnered successful results in the past. You can also use recruiting software to make it easier for your employees to publicize job openings and reward them with a referral bonus if their efforts result in a successful hire.

On the flip side, if you notice that you're investing a lot of time sourcing candidates through a particular channel, and those candidates tend to not pass through your interview process, you can stop investing time in this channel, and focus your energies on other channels that tend to produce stronger candidates.

Encourage open communication between hiring managers and recruiters

By having an open dialogue between hiring managers, sourcers and recruiters, you can ensure that your team is maximizing the amount of time they spend interviewing qualified candidates, and minimize the amount of time spent on candidates who are unlikely to pan out. Recruiters don't intentionally put unqualified applicants in front of hiring managers—they just require open and honest feedback, so that they'll know what to look for in future candidates.

In addition, if the hiring manager notices patterns in candidates who tend to fail your interview process, this is helpful feedback to provide to the recruiter. Recruiting software and applicant tracking systems provide a centralized system where interviewers and hiring managers can provide informative feedback about candidates. By having the hiring manager and the recruiting team sit down together and review feedback about unsuccessful candidates, as well as successful ones, the recruiting team can better understand what types of candidates they should send through the pipeline, and which candidates are unlikely to pass the interview process.

Look for common concerns in the team's feedback

Different interviewers can often interpret the candidate's response in different ways. For example, some interviewers may find the candidate as appearing aggressive or defensive in their response, whereas other interviewers may not pick up on any such signals.

Since there can be a lot of variance in the way that interviewers interpret the candidate's responses, it's best to treat any concern that appears from more than one interviewer as a red flag, and have a discussion with the interview panel about these concerns. If only one interviewer has some minor concern about the candidate (but isn’t too sure), and no other interviewers raise similar concerns, it can still be worth discussing with the interviewer about why they had such a concern and how strongly they feel about it. If they do not feel strongly about their concern, it may be acceptable to move forward with the candidate, depending on how risky you view the candidate, and depending on how many other qualified candidates you have in the pipeline.

One other important note here is that many interviewers may be hesitant to provide sharp, negative feedback about a candidate who they feel would not be a suitable hire. This is especially true when other team members give glowing positive feedback about the candidate, since the timid interviewer may not want to stand out as the lone negative voice. Though this type of interviewer should be encouraged to voice their true opinion (which is why they were selected to be on the interview panel in the first place), this is often easier said than done. In such a scenario, the hiring manager will need to actively look for any signs of hesitation in the interviewer's feedback about the candidate, or have a 1-1 conversation with the interviewer to get their true thoughts about the candidate. If you find that other interviewers have similar concerns, then this is likely a red flag that should be discussed.

Take the candidate for a trial run

As much as possible, it's best if you can have the candidate try to work with the team in a realistic environment. This can be as simple as incorporating a 'test' into the interview process, where they must complete a short sample task or project. Or, this can be as extreme has hiring the candidate on a month long contract, and deciding if it makes sense to extend a full-time offer afterwards. Either way, the point is that the best way of understanding if a candidate will succeed at your job is to give them tasks that closely mimic your work environment.

These sample projects are an excellent way to gauge if the candidate has the necessary skills to succeed at the job, and also provide invaluable information as to whether or not they will be able to collaborate well with other team members.

The downside to longer (more than a few hours) trial runs is that it can be costly for candidates to spend the extra days or hours working on your project. This is especially taxing on candidates who currently have jobs, and who need to take time off from their current job in order to work on your project. To help mitigate these concerns, it’s best if you can compensate the candidate for their time, for example, by paying them an hourly wage for the project. Given that these trial projects can be costly for both you and the candidate, it makes sense to only take this step for candidates who you feel have a likely chance of being extended an offer.

Bottom line

Hiring the wrong employees can have cascading negative impacts on your workplace, and can be significantly worse than not hiring someone for the role at all. As a result, it makes sense to take the necessary precautions in order to avoid making a wrong hire. By following the advice above, you can improve your hiring process and minimize your chances of hiring the wrong candidate.

Bruce Hogan

Bruce Hogan is Co-founder & CEO of SoftwarePundit. He leads the team's research and publishes content about software products and trends. Bruce has experience investing at multi-billion dollar private equity firms, leading teams at venture-backed technology companies, and launching new businesses. You can connect with Bruce on LinkedIn.

Bruce is an expert in several software categories including:

  • Dental software
  • Mental health software
  • SEO software
  • Social media software

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