The real costs of hiring a wrong person


Madelein Smit | HR expert and MD | HR Company Solutions | mail me |

In a bid to cut costs, companies often attempt to handle prospective employees themselves. This approach, while often sensible, has far-reaching effects for the employer, especially when it becomes apparent that the new employee and the organisation’s values are in contrast with one another.

While it may not be exact science quantifying the costs associated with replacing an employee, most organisations spend in the hundreds of thousands, often due to having hired and trained an employee who wasn’t well fitted for the organisation in the first place.

Poor staff retention

Apart from the costs around recruitment, on-boarding and training, the broader effects include lost productivity during the time it takes to find a suitable candidate, low morale of other employees, and the negative impact of a high turnover rate.

The reality is that poor staff retention also negatively affects an organisation’s bottom-line.

This reality doubles for younger candidates who are far more fastidious about staying with an employer. They cite career development, the ability to do meaningful and creative work, how innovative an employer is, growth prospects and ethics as part of their reasons for changing employers.

Recruitment costs

According to a PwC study, the estimated cost turnover for a General Manager costs an organisation around R350,000, this figure includes the cost of lost productivity, advertising the vacant role and placement agency fees.

Attrition is encountered by organisations everywhere. When companies opt to conduct their own recruitment processes, they often miss the red flags associated with a bad hire and this can exacerbate the cause of attrition.

Thirty-two percent of our clients, who before using our services had chosen to conduct their recruitment initiative reported losing their recently placed candidates in six months or under.

While some recruitment agencies may justifiably or not, charge astronomical figures they should not be ridiculously cheap either.

Super cheap agencies often lack access to sourcing tools, talent platforms and verification security checks. They sometimes fail to conduct a due diligence assessment, leading to candidates with fraudulent credentials slipping through the selection cracks.

A 2017 survey conducted by MCI found while 64% of organisations used social media to recruit candidates; 57% of organisations used a recruitment management agency. Overall, recruitment agencies and internal referrals gave the best quality candidates; whilst print media gave the worst.

In conclusion

If as an employer you insist on handling the hiring process yourself, be diligent and do not get complacent with the recruiting methods.

Candidates sometimes misrepresent or lie on their Curriculum Vitae’s. Knowing how to screen a prospective employee is not always easy and the cost of putting up with or replacing a bad hire is often more costly than simply using professional placement agencies.



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