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With the right people in the right positions, companies with potential will achieve success. During periods of growth, each new hire is an opportunity to find the top talent who can lead, manage or promote your business in a way that keeps you moving forward. Those same opportunities, without the proper preparation, can lead to pitfalls that are expensive and damaging. It is important to know the potential cost of a bad hire, so each opportunity is approached as a deliberate, strategic, and calculated investment in the makeup of your organization.

The primary costs of a bad hire include the financial cost of replacement, the loss of time (opportunity cost), and a potential loss or disengagement of your existing, productive employees.

It is known that a bad hire will end up on the books. Replacement costs will vary based on the company and the type of position being hired, but some surveys give us a general idea of how much it can cost. The U.S. Department of Labor estimated that the average cost of a bad hiring decision is equal to 30% of the first year’s potential earnings.[1] In a 2012 CareerBuilder survey, 69 percent of the respondents reported adverse effects from bad hires, twenty-four percent of whom said a bad hire “cost them more than $50,000.” [2] If you then factor in the sunk costs of salary, benefits and company resources that were dedicated to that employee, the financial costs alone are unmanageable for most small to mid-sized companies.

Although the monetary cost of replacement will be a glaring reminder on your books, the less quantifiable opportunity cost can be an even bigger loss. The time you spend training a new hire that will not succeed in your organization is an investment that will see a negative return. That same time invested in the right person could result in a strong leader, an increased operating capacity, or a renewed sense of inspiration in your corporate culture. Depending on the job role, six months or more can pass before recognition hits that a person is not fit for the position. In the ever-changing diagnostic and laboratory testing industries, six months of lost training time and lost production is a substantial cost.

If the bad hire is in a management role, the cost to your organization’s culture will be compounded. A leadership hire that does not succeed can result in the loss or disengagement of good employees as well as a decline in overall morale. Employees who see their leadership falter will tend to worry about job security. Conversation surrounding the leader’s termination will be speculative and create an incomplete narrative that does not serve to inspire the company.

So how do you make the right hire? Plan ahead by having a detailed hiring process in place at all times. Make sure you have an accurate job description that is announced over the proper channels. Research your candidates thoroughly, including background checks when appropriate. Interview the candidate multiple times, over the phone and in person. When you find the right person, support them with a strong onboarding process and executive coaching. When hiring a leadership position, the opportunity and risk is much greater, so look for a recruitment firm with a relevant database and a proven record of placing top talent in your industry.

For more information on hiring top talent for your firm, be sure to download our complimentary white paper, Ten Steps: Best Practices in Hiring Laboratory Professionals.


[1] - Who Are You Really Hiring? 10 Shocking HR Statistics

[2] Careerbuilder - Nearly Seven in Ten Businesses Affected by a Bad Hire in the Past Year, According to CareerBuilder Survey