10 Important Statistics on Bad Hiring Decisions
We’ve all been warned at length about the cost of a bad hire, and that cost is more than just monetary. A bad hire can put a strain on a team, affecting those around them in a ripple effect. CEO of HootSuite, Ryan Holmes said,
“One subpar employee can throw an entire department into disarray. Team members end up investing their own time into training someone who has no future with the company.”
There are enough articles on the cost of a bad hire to keep you busy for days, so here are the highlights from studies and research from across the web on what a bad hire can end up costing. Most of these dollar values will reflect costs like sourcing, recruiting, hiring and lost productivity, which all affect the company as a whole.
Hiring Decision Statistics
- The average cost of a bad hiring decision can equal 30% of the individual’s first-year potential earnings. Tweet this stat. (From the US Department of Labor and Statistics)
- The successful aren’t immune, and they’ve had to learn from their mistakes. Zappos CEO, Tony Hsieh once estimated that his own bad hires have cost the company well over $100 million. Tweet this stat.
- 66% of employers said they experienced negative effects of bad hires in 2012. Of these employers, 37% said the bad hire negatively affected employee morale. Another 18% said the bad hire negatively impacted client relationships. And 10% said the bad hire caused a decrease in sales. Tweet this stat. (A study from the National Business Research Institute)
- 43% of respondents from the same NBRI study cited the need to fill the positions quickly as the main reason that bad hires are made. Tweet this stat.
- It costs $7,000 to replace a salaried employee, $10,000 to replace a mid-level employee, and $40,000 to replace a senior executive. Tweet this stat. (From HR.com)
- As much as 80% of employee turnover is due to bad hiring decisions. Tweet this stat. (From Harvard Business Review)
- 36% of 1,400 executives surveyed claimed that the leading factor of a failed hire, aside from performance problems, is a poor skills match. The second leading factor at 30% was unclear performance objectives. (Study done by Robert Half)
- 41% of companies polled by Vitamin T Staffing Firm estimated that a bad hire cost more than $25,000, and 1 in 4 said that it cost them over $50,000. Tweet this stat.
- SayIt Communications calculated the ROI of a bad hire at -298%. Tweet this stat.
- 75% of the demand to hire new employees is simply to replace workers who have left the company. Tweet this stat.
These are important statistics to keep in mind when it comes time to invest in HR and recruiting. While we haven’t crunched the numbers, it is pretty obvious that arming HR and recruiting professionals with the right training and tools that it takes to prevent costly bad hires, yields a powerful return on investment. The cost of poor hiring practices is extremely high, no matter how big or small the organization is.
Are you thinking about investing in tools and training to prevent numbers like these from happening in your organization? ADP has a pretty awesome (and slightly scary) Bad Hire Calculator. Find out what bad hires are costing you, and then get in touch with us to gain the proper tools to combat this important business issue.