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How Much it Really Costs Firms to Hire and Keep a Bad Recruit

Credential Sentry's Communication Team12/13/2022
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Loss of productivity, increased training costs, and even the risk of legal action (on account of, for example, hiring or retaining individuals without the proper credentials to perform their duties) all add up to a hefty price tag. Bringing the wrong person into an organization can also have a negative effect on the morale and productivity of the entire team. Not only is it essential to hire individuals who have undergone a rigorous screening process that includes professional license verification, but organizations should also continually re-verify the professional licensure status of new hires, as old verification data is as outdated as last month's bread. License verification should accompany assessments of who amongst prospects will be a good cultural fit, and who will be a productive contributor.

In this article, we will discuss the costs that can result from hiring and keeping the wrong person, as well as some strategies for avoiding these pitfalls in order to protect your company's reputation and ensure the success of the endeavor overall.

How Much Would a Bad Hire Cost Your Business?

A bad hire can constitute anything ranging from bringing on someone who doesn't align well with the company's culture to hiring someone without the proper credentials to work in a regulated occupation like medicine, law, or accounting.

According to research that CareerBuilder conducted a few years ago, when a business makes a bad hire, it can lose an average of $17,000.

However, this figure does not account for the indirect costs that can be associated with hiring the wrong person such as damage to morale, misallocation of resources and a negative impact on company culture.

Though hard to quantify, hiring an unlicensed professional or retaining an employee who has lost eligibility to practice their profession at some point while working at your organization can also generate costs. Reputational damage may precede financial liability to an organization’s stakeholders (including customers, vendors or other employees), especially if there is negligence in the course of conduct.

The CareerBuilder study also noted that 74% or nearly three in four employers are affected by a bad hire.

Rosemary Haefner, Chief Human Resources Officer at CareerBuilder, added that one symptom of a bad hire is disengagement, which is contagious and can spread to other employees, resulting in subpar performance and unethical conduct.

Direct expenses, like those listed below, contribute significantly to the overall financial losses caused by a bad hire:

  • Hiring Costs - The cost of hiring can quickly accumulate. Posting a new job advertisement, reviewing a new batch of resumes, re-conducting interviews, checking an additional set of references, and verifying professional and occupational licenses can consume considerable time and resources.
  • Severance - Expenses incurred as a result of having to terminate a problematic employee in accordance with the law, including anticipated or unexpected employment law-related legal fees.
  • Disruption Costs - When business operations are disrupted, certain costs frequently arise. Costs associated with disruptions can include lost revenue, overtime or contract workers to gap-fill a vacant role, or delays in ordinary business operations.
  • Compensation - Employee direct or indirect compensation includes their salary, benefits, and the cost of any training they may require. Also included are the costs associated with health insurance and retirement plans.

In addition to direct expenses, there are also indirect ones, which include:

  • Missed Business Opportunities - The foregone profits caused by a company's inability to consummate a sale owing to the absence of a competent and essential employee. A competitor may be able to move faster and more effectively.
  • Reduced Morale - The morale of an entire team can take a hit when an employee is a poor fit for their position. As a result, productivity may suffer and employee turnover may increase.
  • Damaged Reputation - A bad hire can harm the company's reputation not only with customers and within the industry, but also amongst current and prospective hires. Here are some cases where we've documented how unlicensed workers harmed their companies' reputations.

How to Manage Bad Hires?

If you have made a poor hiring decision, you must act quickly. The sooner the situation is fully resolved, the less the damage will be. A re-evaluation of systems and processes is also important: what went wrong? What could you have done differently? This will prevent you from repeating the same mistakes in the future.

Next, talk to your employees. They may have valuable insight into what went wrong and how to prevent it from occurring in the future.

A study found that supervisors spend 17% of their time managing poorly performing employees. This results in a loss of productivity. Dealing with a bad hire is never easy, but by taking quick and decisive action, you can minimize the damage.

Avoid Bad Hiring and Retention Decisions with Better Screening and Ongoing Monitoring

The best way to avoid a bad recruit is to have a strong hiring process in place. This process should include:

  1. Defining the job requirements - Before posting a job, it is important to take the time to define the specific skills and experience that are required for the position. This will help to ensure that only qualified candidates are considered for the job.

  2. Conducting thorough background checks - Before making a final decision, it is essential to perform exhaustive background checks on all candidates. This includes checking references and confirming credentials and professional licenses for those who are hiring in licensed industries.

  3. Conducting license verification in regulated industries - Verification of candidates' licenses is an essential step in the application process for professions that are subject to strict regulations. Additionally, it is essential to make certain that the employee's license is subjected to regular checks throughout the course of their employment. Companies should be wary of relying on stale licensure status data.

  4. Taking your time - Making a rushed hiring decision can often lead to regrets later on. It is important to take the time to interview multiple candidates and make sure that the person you hire is the right fit for the job.

  5. Investing in employee development - Employee development is a critical component of retaining top talent. You can help ensure that your employees reach their full potential by investing in their development.

  6. Creating a positive work environment - Creating a pleasant workplace for employees to work in is an effective way to both find and keep talented people. Fair pay, opportunities for advancement, and an environment where everyone is valued and accepted are all part of this strategy.

Making a bad hire can be costly for businesses in a variety of ways. The most obvious costs are the financial losses that arise from having an ineffective employee on board. However, there are also other indirect costs such as missed business opportunities, reduced morale, and damaged reputation. By implementing a robust hiring procedure and thoroughly vetting candidates, you can reduce the likelihood of making poor hires in the future.

Schedule your routine license verification at and only hire people you can trust.

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