The True Cost of a Bad Hire – and How You Can Avoid It
What is the cost of a bad hire?
It looks like an innocuous number – but it’s very, very scary. In fact, it could be costing you hundreds of thousands of dollars per year. It is estimated that the cost of replacing an employee who isn’t performing can be up to 3 times their annual salary.
But these costs can be avoided, the most successful companies understand that by automating hiring process and screening employees based on key workplace performance competencies like cognitive ability and personality they can find a better quality of hire. This science is called competency based assessment and its making hiring the best employees easier than ever.
Here’s three ways in which your bad hires are costing you, and how you can avoid them.
- Recruiting: Estimates of the cost of recruitment vary, but once you’ve taken into account the cost of advertising for the job and recruiter time the data shows that this typically costs between 15%-30% of salary. Typically, much of this cost is the arduous screening of CV’s and time consuming interviews which can quickly eat up a recruiters hours. However, implementing automated screening based on job aptitude has been shown to reduce the initial applicant pool by up to 90%, so recruiters can spend their time getting to know the employees that have proven potential.
- Training: Training is one of the costliest activities of hiring, the cost of training is two-fold – not only do you have to pay the salary of the new employee, and you also have to incur the expense of a highly experienced employee imparting their knowledge. This is where competency based pre-screening is perhaps most successful. A higher performing employee will have both the drive and the ability to learn faster than their peers – so you have to spend less time training them.
- Productivity: According to the research, it takes an average of 5 months for an employee to reach full productivity. If you want the numbers – during the first month or so, employees will function at about 25% productivity, and this will gradually increase throughout the following months. This means that in the first year of employment, an average employee will only earn about 80% of their salary in terms of productivity. In practical terms, if you’re paying a new manager $100,000 and have to let them go after 6 months, you’ll have incurred more than a $25,000 dollar loss from lost productivity alone. Competency based pre-screening assessments is proven to help you find the star performers, who will reach their full potential faster, so you don’t have to deal with lost productivity.
No one has ever said recruitment is easy – but it can be made easier. To hire the right person for the right role, you will need to integrate technology with your recruitment strategy. This means utilizing online assessments to measure job skills and competencies to predict performance. Check out this page to learn more about how an online assessment can aid you towards avoiding the cost of a bad hire.
This article was originally written and posted by John Austin, CEO of Talegent International. The original post can be found here: http://linkd.in/1geRpX4