Calculating the Cost of a Hiring Mistake
Making a new hire brings with it both excitement and reservations. The excitement comes from experiencing the inevitable rejuvenation that a new employee brings. Whenever someone new is introduced to your workforce, it’s almost impossible to not feel enthusiasm regarding what he or she brings to the table in terms of experience, aptitudes, and personality. This reinvigoration usually happens regardless of a new employee’s initial performance. This is referred to almost universally as ïthe honeymoon period.ï Only after that’s over does the hesitancy you may have had over the new hire re-emerge. If it ultimately turns out that you made the wrong choice, now you’re left facing the scenario that no manager wants to deal with: calculating the cost of a hiring mistake.
Having an open position presents the potential for a massive amount of lost revenue. Not only are the functions of that role not being completed to their fullest, but those of other employees will also suffer as they try to compensate. Yet far too many managers allow this to rush them into hiring a new employee to fill that role. In their haste, they may find themselves more willing to overlook a candidate’s shortcomings due to their feeling as though they have to make a hire. However, if they’re later put in the position of calculating the cost of a hiring mistake, they may discover that bringing on the wrong employee can be even more costly than leaving a position open.
Evaluating the Cost of Hiring and Terminating an Employee
How can you determine this before making the wrong hire in the first place It’s simple: calculating the cost of hiring mistake before ever posting a position will give you an accurate idea of just how much of a risk a wrong hire can present. These costs can be broken down into two categories: hiring and termination. The actual cost of creating a pool of applicants include those needed to post a job opening, as well as the expenses associated with using a headhunter or staffing firm to help identify qualified candidates. Then there are the costs of having to set up interviews themselves. If you’re having to bring candidates in from outside your geographic area, then you need consider how much travel and lodging will cost. Finally, you’re left with the cost of having to train and acclimate whoever it is that you do choose to hire.
Yet those are simply the direct costs. You should also consider how much is lost in the time and resources taken away from your regular tasks in order screen candidates, conduct interviews, and train new hires. In many cases, these will often amount to more than any of the measurable costs that go into brining a new employee on.
If the revenue lost on a bad hire ended there, it would be one thing. However, you also have to consider how much is lost if you’re later forced to dismiss that person. You could be forced into offering some sort of severance benefit on top of the money already needed to repost the position and the man-hours lost from assigning out the tasks associated with it. In certain cases, you could even face the potential of legal action if the dismissed employee believes his or her termination was unwarranted.
How to Avoid Hiring Mistakes Altogether
Rather than being placed in the position of calculating the cost of a hiring mistake, it’s better if you’re able to avoid them altogether. Here are just a few suggestions on how to do so:
-Go into an interview with the ideal candidate in mind: Don’t wait for the candidate pool to dictate who you want to hire. Go beyond the minimum job requirements and consider what sort of skills, personality, and experience you want for the position.
-Do not make a hire based off of a first impression: Some people are just born with the gift of being well-spoken and personable. This can get you into trouble if you think those natural talents will automatically translate to the job you’re hiring for. Consider adding more technical elements to subsequent interviews in order to really gauge one’s ability to fulfill the tasks related to your open position.
-Establish a well-defined hiring policy: Identifying your company’s hiring policies and practices will help avoid certain hiring mistakes, such as managers not vetting applicants adequately or simply hiring friends or family.
Calculating the cost of a hiring mistake is a process that no one wants to ever have to go through. Some may have you believe, however, that this is an inevitability when you’re in an executive or managerial position. This simply isn’t the case. There are plenty of tools out there to assist you during the hiring process to find a job candidate ideally suited for your position. Mighty Recruiter offers you such resources. Trusting in them helps ensure that whomever you bring in will be uniquely qualified to contribute to your company’s success.