Cost of a mis-hire?
May 11, 2021
Hiring the wrong person costs a fortune. Putting a dollar figure on the cost of a mis-hire is difficult as it depends on the role. A poor hiring decision for an entry level administration position could potentially cost 20 thousand dollars or more, whereas a recently hired CEO who made poor decisions could cost a business hundreds of thousands of dollars, perhaps millions.
Take the case, as reported in the Sydney Morning Herald on 3.10.16, concerning Sigma Pharmaceuticals and the loss of almost $60 million:
“The owner of Amcal and Guardian pharmacy chains, Sigma Pharmaceuticals, is suing two former disgraced executives over $59.3 million in losses the company allegedly incurred through cooking the company’s books. Sigma launched action against its former Chief Executive and former Chief Financial Officer in the Supreme Court of Victoria late last month seeking compensation, damages, interest and costs allegedly associated with their crimes.”
Even the best-case scenario where you hire someone, who, whilst of good character, nevertheless cannot do the job and must be moved on or let go, still costs money through reduced productivity and opportunity costs, and then having to start the recruitment process again; with the risk of repeating the same mistake.
Perhaps a much worse case scenario is when you hire someone who is only marginally productive and causes ongoing minor problems that are below the radar for easy dismissal. That employee could cost tens of thousands of dollars annually.
The benefits of avoiding one or more mis-hires cannot be over-stated. Aside from saving money by reducing the frequency at which you recruit, you also increase productivity and profits by improving the quality of your staff. But more importantly, the economic value of gains from improved hiring methods are typically quite large.
The good news is that mis-hires can be avoided; recruitment doesn’t have to be a “hit and miss” affair. It isn’t a difficult problem to fix and it might not be any more time consuming than your current method; but it does take an open-mind, some self-discipline, and some money, albeit a fraction of the cost of a mis-hire.
Contact us if you would like to learn how to avoid a mis-hire and select good staff and keep them.
“Learn from the mistakes of others. You can’t live long enough to make them all yourself.”