Why Bad Hiring Costs More Than Not Hiring

Marc Denholm • April 17, 2015

The recruiting process is time-consuming and costly. According to MBIE’s (somewhat optimistic) employee cost calculator the average cost per hire for IT workers in New Zealand is just under $7000. To ensure a recruitment drive is ultimately profitable for your business, mistakes have to be kept to a minimum.

As expensive as a successful recruitment process is, there is no real consensus on the cost of a ‘wrong hire,’ but we know it’s high. The Harvard Business Review reckons as much as 80% of employee turnover is down to poor hiring decisions.

It’s not hard to see why the potential costs of recruitment can run so high. Associated expenses for a new hire begin at the interview stage: travel, hotel and food arrangements are often covered by the employer (especially for highly sought-after positions). They may also be expected to help with relocation costs. Then there are training and orientation periods. Even with an initially promising candidate, it could take six months before an organization realizes they’re the wrong fit. That’s when the costs really begin to mount.

Quite apart from having to start all over again with the expenses outlined above, the cost of terminating a contract is potentially huge, and extremely hard to predict. The ex-employee could pursue a wrongful dismissal case through the courts which, even if unsuccessful, is a major distraction for a growing business. The knock-on effects are difficult to quantify in pure financial terms, but range from bad publicity to low employee morale. All of these factors can have a significant negative impact on the health of a business.

How Can I Avoid Hiring the Wrong Person?

By implementing a thorough recruitment process the first time, you can make sure there won’t be a second round. Skills testing is crucial, but equally important is setting out the requirements and expectations of the job in a crystal-clear fashion, so there can be no doubt in a candidates mind what their responsibilities will be.

In order to bring the requisite clarity to the job description you, the employer, must be 100% certain on what it is you’re looking for. It’s tempting to pull a job description off the shelf, or simply recycle one from a departing team member. But if you want to snag the perfect candidate you have to closely analyse the needs of your business to identify weak spots and craft a job description that calls on new skill sets.

Once you’ve minimized the number of unqualified applicants with a clear job description, avoiding the wrong hire becomes more intuitive. The interview stages will tell you a great deal of information that doesn’t come across on a paper resume. Look for signs that the candidate is a good collaborator. Do you have a rapport with them? Will their verbal communication skills be effective in a client-facing role? This is where you find out whether an applicant is the right fit for your company culture.

Above all, remember the maxim: the key asset of a successful business is its people. There are no short cuts to finding great people. The process of hiring the right candidate takes a long time and costs money, so just make sure you only have to go through it once.

Marc is a Director of The Talent Hive and leads our IT recruitment practice. Originally from the UK, Marc has been living in Christchurch, New Zealand for ten years and working in the recruitment sector for just as long. Marc has worked as an in-house recruiter and within multinational recruitment consultancies and independent SME recruitment businesses.

At The Talent Hive we specialise in connecting IT & Engineering professionals with the right career opportunities. We encourage collaboration, socialising your success and sharing industry insight and expertise. Start the journey, connect with The Talent Hive today.

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