Let’s try to figure out the real cost of a bad hire taking into account a rather possible scenario:
Let’s assume we have hired ‘A’ as a Senior accountant for a Gross salary of RON 11000 per month. While the company provided 1 month of training, after a slow painstaking period of 4 months, both the Company and the new hire agreed to part ways.
The Company hired a new Senior accountant ‘B’ with the same level of salary. Fortunately, this new hire was a perfect fit. Moreover, the Company started a recruiting campaign soon enough to be able to recruit ‘B’ just when ‘A’ left. The new employee (‘B’) reached the optimum level of productivity after 5 months.
Another downside: during the 9 months when it looked like there was no viable solution to hire a perfect fitting Senior Accountant, another key member of the team, Senior Accountant ‘C’, left the firm because of long work hours and strained work dynamics.
To hire the 2nd Senior Accountant ‘B’, the Company employed a combination of external recruiting, posting the hiring opportunity on job platforms on its own, and internal recruiting.
Adapting REC methodology (https://www.rec.uk.com/our-view/news/press-releases/hiring-mistakes-are-costing-uk-businesses-billions-each-year-rec) we calculated the actual cost of a bad hire, triggered by ‘A’ who failed to perform in the job. Details in the picture included in this post.
The bottom line is surprising, isn’t it!
Scenario 1 (one of the Senior people on the team is leaving) shows a staggering 2.5 times the annual salary of the position we recruited for. The figure does not include the salary paid to ‘B’, but only the actual direct and indirect costs generated by the bad hire ‘A’.
Scenario 2 (when the Chief Accountant manages to keep the team intact until the 2nd hire reaches optimum performance level) still amounts to an impressive 1.2 times the annual salary of the position we recruited for.
While one could comment on these figures and the logic behind it, the table raises a valid point: there is a material cost related to a bad hire and this is far from being irrelevant.
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