The Cost of A Bad Hire

According to the U.S. Department of Labor, the average cost for each bad hire can equal 30 percent of that individual’s annual earnings. For small companies, a five-figure investment in the wrong person is a threat to the business. 

When you hire the wrong mid-level manager earning $60,000, for example, the real cost to your organization will be $78,000.

There are several ways that making the wrong hire can negatively impact your budget. Most costly “both in time and money” are recruiting efforts. Time and money that your hiring managers spend prospecting, pursuing, interviewing, screening, and making offers to candidates can never be recovered.

And while the financial impact is quantifiable, chief financial officers rank a bad hire’s morale and productivity impacts ahead of monetary losses. Many chief financial officers surveyed in a recent report were most concerned about degraded staff morale (39%) and a drop in productivity (34%). Monetary costs came in third (25%).