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Is a bad hire hurting your ROI?

Angela Leffler
Published May 17, 2017

roi-blog

Understanding the ROI in your business can mean the difference between success and failure. It’s easy for an organization to measure revenue and the hard costs associated with it. But what happens when we take a look at the intangible costs affecting ROIspecifically those associated with employee turnover?

Each year, companies are losing thousands (if not millions) of dollars because of the rates at which departing employees need to be replaced. A study by the Society of Human Resources Management (SHRM) indicated that

Let’s put that into perspective:

If you lost a hire making $65,000/year, that means it could be costing your company upwards of $325,000. And that is on the conservative side.

Assessing the impact of turnover comes down to more than just losing that employee. The cost of a bad hire can be broken down into direct and indirect costs.

You have your obvious costs associated with recruiting and training a new hire. You can project the costs of interviews (and all the steps associated with the interview process), potential travel costs (if hiring an off-site employee), and training/onboarding. But then you have the hidden or indirect coststhings like missed sales opportunities, strained relationships, a decrease in employee morale and company culture. It can take a new employee 1-2 years to reach the productivity level of an existing employee. An article published by Fast Company outlines how the costs of a bad hire go beyond just their salaries.

  • 41% Lost in worker productivity
  • 40% Lost in time due to recruiting and training another worker
  • 37% Expense incurred due to recruiting and training another worker
  • 36% Lost due to negative impact on employee morale
  • 22% Lost due to negative impact on client solutions

So, how do you decrease this risk? How can you ensure that turnover is not affecting your ROI? It all comes down to hiring the right person for the job first. 

Implementing systems like a pre-employment assessment at the top of the hiring funnel will help ensure that you:

  • Filter through your vast amount of applicants and focus only on those who are a great match to save you time and money
  • Increase your chance of hiring the right candidate and decrease turnover
  • Decrease the risk of indirect and hidden turnover costs

If your focus is on direct, measurable ROI, you may not even be aware of the hidden costs associated with employee turnover. These indirect costs are putting your ROI at risk. It’s time to assess how to better manage the hidden fees of turnover. Investing in your hiring process, in the beginning, will pay off in the end.

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