How much does a bad hire really cost?

by Philippe Riboton, Managing Partner at HR Partners International Executive Search

So you just closed the recruitment of your new commercial director for one of your subsidiaries and you’re happy. But what you don’t know yet is that you just made a EUR 50,000 mistake. According to a survey conducted by Harris Interactive for CareerBuilder, EUR 50,000 is the average cost of a bad hire in Europe. The cost of a bad hire isn’t only the cost your company engaged in turning to a recruitment firm for it – nor the cost of the recruited employee itself during the period he or she actually worked for your company. “The initial costs such as the agency recruitment fee or the cost of making an assessment center can be minor versus other costs after hiring the wrong person”, acknowledges Miroslav Kubricht, Managing Director for Yves Rocher for the Czech and Slovak Republics. He says “time dedicated to the right training and the involvement of other people including the costs of potential damage and business losses can be finally much higher versus the initial recruitment costs”.

As a matter of fact the hidden costs of a bad hire are pretty disturbing. It is of course a loss of productivity for the department the person was working for (and as a result for the entire company). It is also a loss of motivation and engagement for the team who was reporting to this newly hire. As highlighted by Monika Hilm, Regional Lead for the Czech Republic and Slovakia with hospitality group Vienna House: “when a person is hired that does not fit your culture or the personality does not fit with your group – it causes demotivation not only for the newcomer but also it creates unhappiness within the team. The consequences can easily be the loss of both the new hire as well as existing personal”.

Another impact can be on the relationship with clients. When will you actually know how many clients this commercial director has met and who’ve been poorly impressed by his performance, leading them to think that it might be time to consider retendering the services you provide? Unfortunately there is no miracle solution to eliminate that risk. But avoiding settling for any candidate when a position is unfilled is certainly an option to consider. Engaging in testing candidates for both hard and soft skills but mostly in extensive and comprehensive background checks on education and employment history can be another one.