The cost of a wrong hire, or doing without, how much is it really costing you?
Sorry for the Hiatus. With my ankle broken in multiple places and the medications, I was probably better off silent. I guess I need a succession plan and stand-in as I last blogged about.
Continuing on personnel issues, having managed hundreds of employees and contractors, closed facilities and divisions of companies, and sold portions of all of a few companies, I have had to hire and fire many people. As with any commitment it’s better to make the right decision initially, or at least take corrective action quickly, than to use “hope as a strategy”.
I’ve hired and fired from the executive level all the way down to the production and unskilled level. The recruitment and screening process may be different, but the cost f a wrong hire is typically proportional to the earnings of the individual being hired, at least that’s what Jim McCaskill of High Desert Executive Search tells me. From my experiences, the costs may be higher in collateral damage such as company moral, lost opportunity, personnel lost due to the wrong hire, and bad decisions that were made (for example inventory purchased, lost customers, etc.).
As Jim tells me, “All employees should either make the company money, save the company money, or both. Their impact should be more than their pay or why employ them? Most things I have seen and read estimate an employee’s impact is between 3 to 5 times their base salaries.”
From a recruitment prospective Jim estimates, “Going with the lower number (3x base salary), the cost of the average 3 months to look at candidates, interview, and for the person to report, that cost is 75% of base salary. Add to that the cost of Human Resources time, and management’s time, reviewing resumes and interviewing candidates, and you are at 80% to 85% of base salary.”
When we discussed the wrong hire, Jim focused on the direct personnel issues, “The cost of hiring the wrong candidate, the time for the second candidate to get up to speed, any relocation and severance, the cost of poor productivity by the wrong candidate, etc. all have to be considered. All told, it is easy to see the cost approach one and one half to 3 times the person’s salary.”
I have seen a number of career counselors tell candidates “Fake it till you make it”. I’m sure they mean well, for the candidate, but you may not have the resources and time to recover from a bad hire.
Ouch, how many managers actually consider these factors when they are ‘settling” for what is available in the market or rushing to fill a requisition before it is taken away?
