1.5 Million Reasons to Hire Carefully

Because it’s relatively easy to calculate the cost-per-hire (CpH), it is often used as a cornerstone statistic in the analysis of recruitment improvement. Any valuable hiring competitive positioning chart will often have CpH on either the x-axis or y-axis.  Ours at Hub Recruiting certainly does. For this reason, it is probably worth reading Chapter 11 of Bill Aulet’s Disciplined Entrepreneurship if you want to learn more about competitive positioning.

Still, have you ever tried to calculate cost-per-BAD-hire (CpBH)? Probably not, but it is just as important to understand.  Maybe even more so.

During a recent discussion on interviewing techniques, Daniel Cozza from AutoDesk recommended that I read Who, by Geoff Smart and Randy Street.  I promptly put it in my Amazon cart and wasn’t disappointed.  In fact, on page XVII, I found what I was looking for.  Here, finally, was a thoughtful and well articulated perspective on CpBH that drives home the importance of hiring well, and the significant cost of not getting it right.

According to Geoff and Randy, the average hiring mistake costs the hiring company 15x an employee’s base salary in hard costs and productivity loss. The authors’ calculation goes on to estimate that a single hiring blunder on a $100,000 employee can cost a company $1.5 million or more. If the currency of your business is US Dollars, that’s 1.5 million reasons to pay attention. 10 hiring mistakes each year is $15 million or more.

A recent CareerBuilder survey showed that 66% of all companies have been negatively impacted by bad hiring.  These are the top 5 negative effects -  

  • 36% lost productivity

  • 32% showed a negative impacts on employee morale

  • 18% negative impact on client relations

  • 10% lost sales

  • 31% impacted by the cost needed to train another worker after the bad hire

Hiring does not need to be as hard as most people think, but it is far more important than most realize. Steve Jobs thought that it was the most important job activity in a company and because of this, he took it very seriously and did so very carefully. You should, too. Because I think we can probably all agree that a CpBH of 15x base salary is worth avoiding at all costs.