The Cost of a Bad Hire

Your business can only expand to the maximum amount of tasks you can personally handle. Before you get to overwhelm, you will need to leverage yourself and that often means hiring someone.

Adding someone to your team can be a tricky aspect of running a business. According to Forbes magazine, almost 46% of new hires fail within just 18 months.

Before you add someone to your team, take a moment to determine just how much your hiring process costs you. In one of my Profitability Labs, we calculated the costs of a wrong hire.

A few of the factors that went into the calculation included cost of advertisements, the business owner’s time in doing things themselves because of the vacancy, interviewing process, and onboarding the new employee.

My Profitability Lab Clients were quite surprised at their findings. The average cost to hire fell between $5,500 to $15,000. Those costs to hire can be a major hit to your bottom line. When you consider these costs, you want to make sure your selection process is well defined.

There are ways to improve the odds that your final selection of your new team member is the right one. The first step that I recommend to my clients is Preparation.

Part of the Preparation Stage is to evaluate your needs now, near, and far. This simple exercise of evaluating your business in these terms has two immediate advantages:

1. It opens up alternative staffing models, like hiring an independent contractor, especially if the volume of work is short term; and

2. It helps you to distinguish the longer-term career opportunities within your company, which may be of interest to the right candidates.

If your company practices open-book management, getting feedback from your current team is also an important step in the Preparation Phase. The input you receive from others on the team can result in a better fit for the position.

Preparing to hire is an essential piece of the staffing puzzle. Before you start interviewing, take a moment to prepare. When you do, you’ll increase your chances of a strong return on your hiring investment.