The Cost of Bad Hires

If there is one constant in HR and Recruiting – it is the fact that no one will ever agree on how much a bad hire costs an organization!  Never!  It doesn’t matter how much time you put into coming up with some algorithm, how much research to back up your numbers – it’s still going to be 90% subjective/soft numbers at best.  This is the main reason executives in our organizations think the majority of HR/Talent Pros in the world don’t get business!   We come to them with stuff like this:

“We need to reduce turnover because of Engineer who leaves us, costs the company $7,345,876.23!”

Then you go through a 73 slide PowerPoint deck showing how you came up with the calculations all the way down the parking meter expense during the interview, and when you’re done – no one believes you’re even close to an actual number.

The gang over at National Business Research Institute put together a pretty good infographic proving my point – take a look:

NBRI - The Cost of a Bad Hire Infographic

97%+ of the ‘lost’ cost is from “Training” and “Productivity Loss” – those are very subjective measures in almost all organizations.  What that says is – ‘Oh, Jimmy isn’t working out – fire him – and because he wasn’t working out we lost ‘X’ percent of productivity over any other possible replacement (which in itself is a whole other leap)’.  And, we lost 100% of training we put into Jimmy because he is now not here.  Which again is subjective, since most training isn’t one-on-one, and resources used to train are almost always not used just on one person, etc.

So, here’s a better way to figure out the cost of a bad hire:

1. Ask your head of finance or accounting what they think it costs? “Ballpark it for me?”  $10K? Sounds great! We’ll use $10K.

2. Use $10K as your cost of bad hires.

Your reality – HR’s Reality – is it really doesn’t matter what the number is – only that the powers that be in your organization all agree on the number. Stop wasting your time trying to come up with a better number – just come up with a number that those signing the check agree is probably legit.

 

6 thoughts on “The Cost of Bad Hires

  1. What i don’t understood is actually how you are now not
    actually a lot more neatly-appreciated than you might be now.
    You are so intelligent. You realize therefore significantly in relation to
    this matter, made me for my part consider it from a lot of
    numerous angles. Its like men and women aren’t interested until it’s
    something to do with Girl gaga! Your individual stuffs excellent.
    Always maintain it up!

  2. Hey there! I could have sworn I’ve been to this site before but
    after browsing through some of the post I realized it’s new to
    me. Anyways, I’m definitely glad I found it and I’ll be bookmarking and checking back
    frequently!

  3. A free Excel workbook for estimating the annual Cost Of Turnover is available from the following web page.

    http://tinyurl.com/COT-EST

    The Excel file “cot_est.xls” will be downloaded.

    The formulas are based on the results of users of the Bliss-Gately Tool.

    If you have not accumulated sufficient data on your cost of turnover, the free workbook will at least get you closer to the actual cost.

    If you’d like an Excel workbook for calculating monthly/annual turnover rates please visit the following web page, it will download the Turnover Rate Calculator, TO_RATE.xls.

    http://tinyurl.com/TO-RATE

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.