Bad hires cost your business money
As a business owner, you know how important it is to balance the budget and plug any holes that are causing your business to leak money where it shouldn't. But have you considered the impact on your business if you mistakenly hire the wrong person?
A recent survey by The Australian estimated that a bad hire will cost you two and a half times the employee's salary, a figure which goes up even more for high level positions.
To put that in perspective, if you pay a new employee $70,000 a year and they turn out to be a bad fit for the role, you could find yourself out of pocket by $175,000.
Here are some of the main costs of landing a bad hire >>>
New employees cost money
Put simply, employees cost money. In the long run, they also bring you money, and a good employee is worth investing in, but what about the bad hires?
First you have the outlay of running recruitment ads, preparing the interview, and the time taken out of your schedule in chasing references and performing the interview itself.
Once your employee is appointed you will have to meet both the time and monetary costs of training, and the outlay for any new equipment, business cards and so on. For a good employee this will turn out to be a valuable investment; for a bad one, a drain on your precious resources.
Increased supervision and reduced productivity
Under-performing employees typically need more in the way of your time and effort to supervise their work and try to keep them up to speed with their tasks and working practices. An employee who is lazy, procrastinates, or quite simply doesn't grasp their responsibilities will unfortunately keep you on your toes.
A bad hire can also drain time from other members of their team, by holding up work, making mistakes, or with frequent demands for assistance. There is a real risk of reduced productivity, which in turn costs you more in terms of both time and money.
Risk to your peputation
A bad hire poses a serious risk of damaging your reputation, and that of your company. Your employees are the public face of your company, so if a hire lets a customer down with substandard service, it reflects badly on your business.
As the owner, you're seen as ultimately accountable for your company as a whole, including a team member who doesn't deliver good service to your customers.
Employees who don't deal directly with customers can also damage your reputation with costly mistakes that can lead to a loss of time, money, and a dent in your reputation with both your customers and your competitors.
A bad hire can have a devastating impact on the morale and cohesion of the rest of your team. Whether due to slacking, incompetence, or having an unpleasant manner with their colleagues, the wrong hire can sap the energy and positivity out of a team faster than you can say "you're fired".
Unfortunately, you might also find yourself dealing with some resentment among your existing team, for hiring someone who is rapidly becoming a thorn in their side.
However you look at it, a bad hire can cost your company a lot of time, money, and even your reputation.
To save yourself the stress, check your hiring process and make sure it's thorough and designed to give you an insight into the whole person, from skills to interpersonal manners.
It's worth the time and monetary investment early in the process, in return for a recruitment process that works for you and will help you find employees who are worth investing in.
About the author
Tristan Anwyn is an author who writes on subjects as diverse as health, marketing, creating a budget, and SEO.
Timeline: India takes unicorn leap with six in five days
We chart an historic week in India’s tech industry, where in just five days, between 5-9 April 2021, the country achieved six new unicorns, bringing India’s total to 10 in 2021 to date, an immense unicorn leap from just seven in 2020 and six in 2019.
April 5: Meesho
India’s first social commerce unicorn, Meesho raised US$300m from SoftBank, Facebook and Shunwei Capital, giving the Bangalore-based startup a US$2.1bn valuation, a threefold jump from its previous funding round in 2019. Founded in 2015 by two IIT-Delhi graduates, Meesho connects producers and resellers, helping small businesses sell through social media. It has 45m customers and has enabled 13m entrepreneurs to start their online businesses with no investment.
April 6: CRED
Founded just over two years ago, Bangalore-based credit card repayment app CRED raised US$215m from Falcon Edge Capital and Coatue, nearly trebling its valuation to US$2.2bn from its January US$80m round. Allowing customers to pay off their credit card debt while earning CRED coins which they cash in for rewards, CRED has grown rapidly during COVID-19, doubling its customer base to nearly 6 million in a year.
April 7: API Holdings / Groww
The first epharmacy startup to gain unicorn status, PharmEasy (API Holdings), which has digitised 60,000 brick and mortar pharmacies and 400 doctors across India, raised US$350m in a round led by Prosus Ventures. Founded by four former Flipkart employees as a way of making investing simple, investment platform Groww became India’s second-youngest fintech unicorn, raising US$83m in Series D funding led by Tiger Global, quadrupling its previous round in September.
April 8: ShareChat
New Delhi-grown social media startup ShareChat, founded in 2016 by Mohalla Tech raised US$502m from Lightspeed Ventures, Tiger Global, Twitter and Snap taking its raised total over six rounds to US$766m and pushing its valuation to US$2.1bn. The funding will be used to grow its user base and short video platform Moj, which launched in 2020 following TikTok’s ban in India. The regional language startup claims 280m users.
April 9: Gupshup
AI-led conversational message startup joined the unicorn club after raising US$100m from Tiger Global giving it a ten-fold valuation of US$1.4bn. The smart messaging platform, which has seen accelerated growth during the pandemic, was founded in Bangalore in 2005 by serial entrepreneur Beerud Sheth, whose online freelancing platform Elance is now listed. Gupshup’s API enables 100,000+ businesses to build messaging and conversation experiences across 30+ communication channels.