Oct

When bad hires happen to good people

by Joe Metts
Marketing Coordinator at Charles Aris Inc.

Organizations around the world are hyperfocused on the bottom line. For those running lean, that means maximizing the value of each team member, process and action. On the other side of the coin, most organizations recognize the value of A-level talent and are willing to fairly compensate individuals they view as legitimate difference makers.

That’s not a simple balancing act for hiring authorities and decision makers. Landing top talent is expensive, and the need for successful hires only compounds the pressure.

Why are successful hires imperative, you ask? What’s wrong with a little experimentation on the hiring scene? Well, the answer is straightforward: The price of a bad hire quickly adds up.

Even the world’s most successful organizations feel the effects of bad hires. The U.S. Department of Labor estimates that the average cost of a bad hiring decision can equal 30 percent of the individual’s first-year potential earnings. In these cases, organizations large and small generally face five-figure expenditures which certainly weren’t in the budget.

Consider this: According to Gallup Daily, 32 percent of employees in the United States are engaged in their jobs and workplaces – meaning they are enthusiastic, involved and committed to their roles and organizations. Leadership roles generally cost organizations six figures in salary, benefits, equity and so on. That’s a significant investment for a 1-in-3 chance of hiring an engaged individual. Needless to say, those odds aren’t great.

A few more figures to consider: A 2013 CareerBuilder survey revealed that 27 percent of U.S. employers reported that a single bad hire cost more than $50,000. That same survey discovered that 32 percent of employees in the United States are negatively affected by bad hires, and total sales generally decline by 10 percent when adding a bad seed to the senior leadership ranks.

The bottom line? Organization leaders must get it right when it comes to human capital. You’re already managing robust compensation and benefits packages for any team member in any position; hiring the wrong person for a leadership role only compounds the error. The technical and cultural costs of replacing and recovering from that individual are immense.

When talent acquisition professionals are tasked not only with identifying and landing the right people but with H.R. responsibilities as well, executive search partners can be a healthy resource that helps limit exposure to bad hires. One of the chief concerns we hear when speaking to potential clients is “Can I afford to hire an executive search firm?” With the above figures in mind, can you afford not to?