A bad hire. We all know how it feels, because once in a while it happens in every single company.
The smaller your company, the greater the impact.
Quite unfair, isn’t it? In small companies, there’s a big chance that HR knowledge and resources are limited, which often leads to more bad hires. And since you’re a small company, the impact of a bad hire will be enormous.
After reading this article you will know:
1. The impact of one bad hire
2. How to avoid the pitfalls that cause a bad hire.
The impact of one bad hire. Just one.
‘’A bad hire costs a shitload of money.’’ That’s what a CEO answered when I asked him what he thought was the impact of a bad hire.
A bullshit answer. Yes, it costs a shitload of money, but unfortunately the impact is bigger than just losing money. Research has shown that one bad hire costs you 130% of this person’s annual salary. The first 100% is obviously the annual salary. Yes, that’s a lot of money flushed through the toilet. The other 30% however is even more intense on the long term.
The other 30%
The other 30% is caused by the following damage:
1. Client/Customer Experience damage. Projects will be left unfinished and the work completed isn’t of high value. This causes..
2. Reputation damage. People don’t talk that much about pleasant experiences, but almost every bad experience will be discussed. The result: your company’s reputation will be damaged. And finally, this causes..
3.Talent pool damage. Candidates won’t apply at a company with a bad reputation.
We all know what this means. A smaller talent pool means a bigger chance of compromising. And you know the consequence: you might have just hired the wrong person. The Snowball Effect. ❄️
How to avoid the pitfalls that cause a bad hire.
Or maybe I should say: which pitfalls to avoid. Bad hires are in in 99% of all cases caused by (1) a lack of expertise or (2) a lack of resources.
A bad hire caused by lack of expertise
Most people hire on instinct. Especially in young, growing companies, recruitment knowledge is quite limited, so you simply have to. My advice: hire an interim recruiter for 1 or 2 days per week so that you will learn the basics. Recruitment sounds so easy, because you just need people knowledge and job knowledge, right? Well, we know that’s not how it works.
Lack of resources can also lead to a bad hire
This might be the one that hurts the most. There’s nothing as frustrating as knowing that there are resources that can help you while you don’t have the budget for these resources.
Luckily the HR tech industry is changing rapidly. The big systems are getting replaced more and more by smaller, more focused systems that focus on one or two stages in your hiring process. And guess what: they’re getting cheaper as well.
Our Equalture team has spoken to hundreds of recruiters, HR managers and even founders to find out which resource is most valuable when preventing a bad hire. The result: 68% of all bad hires is caused by a lack of skill assessment.
That wasn’t quite surprising for us. Hiring for skills and potential is proven to be way more successful than hiring for experience. I can hear you thinking: ‘’Why don’t companies just start hiring for skills then?’’.
Well, hiring for skills means that you need to assess skills. And assessing skills is very expensive and often hard to do when you’re not an expert (since most assessments provide you with a 25-pages report). So especially scaleups are searching for affordable tools to assess candidates and to automatically interpret the results as well.
If you agree with my thinking you might want to take a look at Equalture.
Making mistakes is human, you can’t blame yourself for that. Causing a bad hire however is quite an expensive one, so you should do everything possible to prevent that. Got any questions about this blog? Please feel free to contact us, no strings attached.
Thanks so much for reading! I really hope this article was a useful read for you. ?