5 Exorbitant Costs of Making a Bad Hire on Your Team

Why You Cannot Afford to Make a Bad Hire

Lazy Looking Young Woman Looking at Laptop

Hemant Mehta / Getty Images 

The manager is an essential part of an organization. Their responsibilities become more diverse depending on how elaborate their organizations' chain of command is. But, every manager has three fundamental responsibilities.

These responsibilities include:

  1. Hiring Great Employees
  2. Developing Great Employees
  3. Retaining Great Employees

If you don’t get number one right, the rest becomes almost impossible.

A manager is better off spending more time hiring great employees. Prioritizing time towards hiring great employees means there will be a smaller chance that you'll have to spend time dealing with difficult employees.

While there are many ways to calculate the cost of turnover (recruiting costs, training costs, severance, etc.), I would argue that the cost of not firing a bad employee far outweighs the turnover cost. This article outlines the high cost of making and keeping a bad hire in your organization. 

Don't Fall for the Warm Body Fallacy

When faced with open positions and under pressure to hire, or tolerating a poor performer because of a freeze on hiring replacements.

I’ve heard numerous managers say:

“Well, a warm body is better than nobody.”

I would beg to differ. In most cases, a “warm body” (or bad hire) is far worse than leaving a position vacant until you can find a great hire or firing a poor performer, even though the person cannot be replaced.

When a manager hires a bad employee, they are often blind to the employee’s shortcomings because the hire is a reflection of their ability to select employees. They want that employee to succeed, and will often miss the warning signs of poor performance and become defensive if someone else points it out.

It's possible to get candid feedback if you suspect that you might have a blind spot. And, don't be worried about having to do this because other managers have done this before you. And, business is business, especially when there's a budget to consider.

The Five Costs of a Bad Hire

  1. Impact on the Rest of the Team: When one employee is underperforming or carries around a consistently bad attitude, it has a devastating effect on the rest of the team. They have to pick up the slack, cover up mistakes, and put up with all kinds of obnoxious work habits from their slacker coworker. Good employees will resent having to put up with the nonsense, morale will suffer, standards will drop to the lowest denominator, and eventually, great employees will quit.
  2. Impact on Customers: Bad hires can’t seem to grasp their job responsibilities, and even if they can, are always looking for shortcuts, or making customers upset due to their lack of customer service. The cost of gaining a new customer is way more expensive than keeping existing customers, and one negative interaction with a bad hire may cause that customer to walk away. Eventually, your brand and reputation will suffer.
  3. Time Spent on Performance Management: A bad hire will suck up the time and focus of a manager. Instead of coaching and developing other employees, they get sucked into an endless cycle of having to listen to complaints from others, give corrective feedback, micromanaging, handing out discipline, and eventually having to be dragged through a painful disciplinary process. Trying to get a bad hire to meet even minimum expectations is like playing management “whack-a-mole.” One problem (showing up late) may temporarily go away, but it is soon replaced with another issue (calling in sick).
  4. The Manager’s Reputation: Every manager makes a bad hire now and then. No one is perfect. However, if a manager establishes a pattern of bad hires, then they get a reputation as an incompetent manager. No manager can make up for a team of bad hires, so it won’t be long before the manager is the one being coached out of their job.
  5. The Cost of Turnover: This is the quantifiable cost that most refer. These costs are real: recruiting costs, relocation costs and training costs all add up to big numbers. Unfortunately, it’s these “sunk costs” that often causes managers to subscribe to the “warm body” theory.

The Bottom Line

These are just a few of the costs you incur from making and keeping a bad hire. I’m sure there are more, depending on the type of organization and employee roles. It doesn’t matter if you are hiring an entry-level minimum wage employee or senior executive. The cost of a bad hire is significant and can bring down a team, manager, or entire organization. While there are no guarantees, taking the time to cast a wide net and doing your due diligence in selecting employees is well worth the effort and will minimize the chances of a bad hire.