Deadly Cost of Bad Hires

Published: 17th June 2015
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No business leader ever intentionally sets out to have a bad hire. Yet it happens every day, and the cost is staggering.

The Department of Labor states that turnover costs US businesses over $5 trillion every year.

That's an epidemic!

Depending on the role, the cost of a bad hire can be anywhere from 50%-600% of annual salary, and that can take a big toll on any sized company…especially smaller ones.

As an example: for a $50k sales rep with a $750k annual quota, the hard costs plus missed opportunities reaches over $400k. Even a non-sales person at the same $50k salary costs over $65k to the company.

It gets worse.

When a company has a bad hire, it often leads to many poor hires within the company. A poor hire is someone who is not achieving their goals, not promotable, but not bad enough to fire.

This results in a culture of mediocrity, leading to low employee engagement and financial strain. Just as epidemic as the turnover statistic, a Blessing White 2013 report on employee engagement states that 60% of US workers have low engagement with a full 15% that are actually disengaged.

Interviewing with blinders

Given the likelihood of low engagement and mediocrity within any company, how is a business leader supposed to fix the problem? It begins with better hiring practices.

Companies who hire the same way over and over again - hoping to find that "special" someone who can knock the ball out of the park - are their own worst enemy in the war against mediocrity.

A Michigan State University study confirms that interviews alone reveal only 14% accurate view of the candidate. If you knew that most interviewing processes reveal a barely more accurate view of the candidate than an iceberg sticks out of the water, wouldn't it make sense to use something more than a standard interview?

Most people understand the definition of insanity as, "doing the same thing over and over while expecting a different result." When being objective, this is a, "duh, no kidding" statement. Yet 90% of hiring decisions are made based on the interview alone, according to a Harvard Business Review study. Considering how poorly traditional interviews alone reveal crucial candidate information, this pattern sounds insane.

Shift the playing field in your favor Using 3 assessments in combination have proven in studies to reveal at least a 92% accurate view of candidates, and a recent Fortune 500 company found they could have eliminated 97% of their bad hires if they had used a similar assessment.

What does this mean to you? You can significantly reduce the risk of hiring mistakes by implementing a disciplined hiring process that includes the use of assessments in combination with customized interviews. Doing this will shift the playing field for you to consistently hire top performers.

Unless you hire more top performers faster than you have to eliminate bad or poor hires, the bleeding in your organization will cause low employee engagement and financial strain. When you factor that against the low cost of an effective assessment program in your hiring process, it's almost like having hiring "insurance" that will ultimately stabilize and grow your company.

The high risk of using interviews alone is simply not worth the price you will pay if you make a mistake. What will you do differently for your next interview of a potential candidate? Here's a recommendation:

Stop the insanity!


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Market Leader Solutions provides a Hire Assurance process that helps companies hire with confidence, manage without frustration, and increase productivity and profits. For more information about how Best-In-Class companies hire top performers consistently, visit http://www.hireassurance.com to learn how you can see better results immediately.

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