If you’ve ever made a bad hire, you know what a harrowing experience it can be. Not only do you need to have at least one difficult conversation with that employee—or many, if you’re adhering to a documented coaching plan—but you also may have to repeat all the hiring and training steps you already completed to replace that bad hire with a good one. That’s expensive from both a resource and time perspective. But how much does a bad hire cost—exactly? We’ll get to facts and figures in a moment. But first, let’s talk about what constitutes a bad hire.
What is a bad hire?
According to this resource, “a bad hire is someone who has a negative impact on things like organization productivity and company performance.” But that’s not all: “a bad hire can also affect retention and thwart an otherwise harmonious office culture.” In other words, you could have the most productive, driven staff member in the business, but if he or she doesn’t jibe with your company culture, then it could be problematic for your office as well as your patients. Below are a few things to watch out for (adapted from this article—which references “telltale signs” from this article—and this resource):
- Low performance or productivity
- Frequent tardiness or absences
- Drama, chaos, negativity, or conflict
- Misalignment of goals and/or cultural fit
Now, once you’ve identified a potential bad hire, you have a few options. As WebPT’s Courtney Lefferts wrote in this article, “if you find that your employee isn’t living up to your expectations, you can use this as a coaching opportunity to help the employee change his or her behavior to meet your standards.” However, “if you find you’ve made a bad hire and the person is dragging down your team and/or adversely affecting your business, it might be time to let him or her go.” And if that’s the case, then “the sooner you can cut ties, the better.”
What is the financial cost?
It’s important to note that the actual cost of a bad hire may not be exact because—as the author of this resource writes—“there are numerous variables when it comes to how exactly a single bad hire can impact an organization.” But whatever the cost may be, it “compounds quickly when you factor in lost time, lost productivity, and the impact on your other employees.” According to the same resource, the total cost of a bad hire—based on a $100,000 annual salary position—is $211,000. Here’s how that breaks down:
But, that’s not the only opinion when it comes to the cost of a bad hire. As Falon Fatemi—the author of this Forbes article—reported, recruiter Jörgen Sundberg “puts the cost of onboarding an employee at $240,000,” which means if you don’t figure out that you’ve made a bad hire until well past onboarding, you’ll not only be out that money, but also have to pony it up again for the next hire. Fatemi also includes the US Department of Labor’s cost estimate for a bad hire, which is at least 30% of the employee’s first-year earnings. “For a small company,” she wrote, “a five-figure investment in the wrong person is a threat to the business.” Even for a large company, the cost of bad hires could be debilitating. Zappos CEO Tony Hsieh estimated that his company lost “well over $100 million” in bad hires, which is why he now offers new employees $2,000 to leave the company if it’s not a good fit.
What is the non-financial cost?
According to Fatemi, “while the financial impact [of a bad hire] is quantifiable, chief financial officers actually rank a bad hire’s morale and productivity impacts ahead of monetary losses.” That’s because “a bad apple spoils the bunch.” In other words, “disengagement is contagious.” Plus, “when a disengaged hire doesn’t pull his weight, good employees get burned out making up for it.” To the latter point, Fatemi told the story of how one bad hire cost her “two—nearly three—key employees,” which is “an exceptionally high price to pay.” But the problems don’t end there: “Poor performers lower the bar for other employees, and bad habits spread like a virus,” she wrote. “I once hired a manager who built a chaotic, everything's-a-fire-drill environment. Even after removing the employee from the equation, we still had to invest time and resources to reset the behaviors of team members who emulated the manager's approach.”
How do I make a good hire?
Now that you know the cost of a bad hire, you’re probably wondering how can you ensure your next hire is a good one. There’s plenty of hiring advice out there—including our personal favorite strategy of hiring for culture first and Hsieh’s strategy of hiring slowly and firing quickly. Here are several more solid tips from Fatemi’s article:
- Trust your instincts.
- Check references.
- Get another person’s perspective.
- Structure the interview process as a trial run for the job.
- “Set clear expectations (and fire fast if they’re not met).”
For even more great hiring strategies, check out WebPT President Heidi Jannenga’s Founder Letter on the topic here—as well this article on hiring the best PT, this one on hiring the best OT, this one on hiring the best SLP, this one on hiring the best PTA and OTA, this one on hiring the best biller, and this one on hiring the best front office staff member.
Have you made a bad hire? What did it cost your practice—and how did you ensure your next hire was a good one? Tell us in the comment section below.