The True Cost of a Bad Hire

There's no question that employees are the number one resource at any given company. Plainly: they're the ones getting it done to nail business objectives that ultimately lead to success. However if a company hires a candidate who turns out to be a wrong fit for the role, it could bring about dire costs, and not just speaking financially. Unqualified candidates could potentially waste the time and energy of managers and existing employees in any organization which in turn, can deteriorate culture and team dynamic.

Studies have revealed that hiring the wrong candidate can costs up to $240,000. This happens more than you might think – 74% of employers stated that they have had bad hires. Not to mention, that’s also a colossal amount of money to blow on someone who doesn’t bring value to the company.

The case with bad hires isn’t as simple as it seems. In fact, the cost can be broken down into several aspects, from sourcing, interviewing, hiring and rehiring. All these associated costs add up to the real cost of a bad hire. The good thing is that these costs are unavoidable. 

So, what is the real cost of hiring the wrong fit for the role? Why is it so essential to business success that managers have to get it right the first time?

The financial impact of poor quality hires

Direct financial and time cost of a bad hire

When a bad hire is brought in, it means that the entire recruitment process adds up to your losses. Essentially, you’re looking at the potential cost of:

  • Writing and reviewing job postings
  • Hiring a recruiter or paying for ad space on job boards
  • Screening candidates for background and work experience
  • Reaching out and communicating with candidates, following up after interviews
  • Scheduling interviews and dealing with last-minute cancellations
  • Finding the right interviewers to conduct interviews
  • Time spent waiting for qualified candidates to respond
  • Negotiating offers

When it comes to the usual work hours, multiple interviews can end up taking up a bulk of your time. The average employer interviews six to ten candidates per job, with each candidate going through two to three rounds of interviews. If each interview goes on for 45 minutes to an hour, it could eat into more than half the work week for the typical office worker. 

These days, there are a myriad of alternatives to the hour-long back and forth interview process.Interview  technology makes it possible to use machine learning and artificial intelligence (AI) to conduct asynchronous interviews. Basically, employers don’t have to sit through tedious screening of resumes and background checks anymore. However, to truly build a connection with candidates, it is crucial to at least conduct a face-to-face interview before finalizing the new hire.

Cost of replacing the bad hire

Considering that all this is done to hire the bad fit in the first place, now you have to do it all over again to replace them. This means writing new job postings, buying more ad space, and screening candidates to find the right fit. 

Additionally, you are looking at the associated costs of training and onboarding the new hires. Any time an employee joins a new company, they’ll usually go through a substantial amount of training and onboarding during their first few weeks or months. When you are essentially investing a good amount of knowledge and resources into nurturing a new employee, it means that all this goes to waste when they do not generate any returns for your company.

It is also worth noting that the employee doesn’t necessarily get terminated right away, even after realizing that they may not be the best staff for the job. While there is usually a learning curve, a bad hire is someone that falls short of expectations even after. This could mean being unable to perform tasks or having a negative attitude. Bad hires usually complete their probation period, if any, and move on to being a permanent role. During this time, productivity fails to hit optimal levels, and customers get frustrated. This adds on to the price that companies have to pay for bad hires. 

Emotional cost of a bad hire

It’s important not to just look at quantifiable costs. Besides monetary costs, the wrong type of employee could lead to productivity and morale loss that stunts business growth.

Besides losing out on important accounts and clients, hiring the wrong employee has a substantial impact on internal staff and culture. Not only does a bad hire negatively impact the HR department, this can ripple out into the other teams as well.

Whether it is due to making up for a lack of skills, disengagement, or frustration with the new employee, other employees of the organization have the potential to be affected by a less-than-desirable hire. At the very least, this would lead to tension among employees. On the other hand, if left unaddressed, employers run the risk of losing a few good employees.

Team members are expected to work together towards organizational goals. However, when there is a certain employee that pulls down the team and affects the harmony and collaboration, it could lead to a plunge in motivation and engagement. Engagement is, after all, highly contagious.

Impact on interviewer experience

A CareerBuilder survey found that 22% of interviewers did not have the relevant expertise in hiring effectively. More often than not, interviewers may lack the experience or knowledge to hire and interview candidates. This could mean asking the wrong questions or missing important red flags in a potential talent. Perhaps this could be because the need for talent came on a short notice and hiring managers lacked preparation. 

Seeing that bad hires, for whatever reason, does a company more bad than good – and the damage is quite exceptional – it is crucial for business success that this process is done right. Moving forward, interviewer training programs should be implemented to help an organization and its employees, protecting their time, budget and culture.


GoodTime transforms interviewer training process. 

It’s time to make a shift toward candidate-centered, connection-driven interviews. Learn more about how to make that happen for your team to win top talent faster.