Making bad hiring choices negatively impact teamwork, culture and profitability. Bad hires prevent healthy teamwork and create headaches for team members and business development manager alike. They add additional stress for everyone in the business and lead to dysfunctional team behaviour further down the line.
Disengagement and unhappiness is infectious and spreads through all teams – even high performing teams. If you have a good team, make sure you do your best to protect your team from unnecessary negativity, politics and blame that can often accompany a wider business transformation process.
What is the monetary impact of bad hires -that a business development manager and directors should consider?
Underperformance and new hire turnover have significant financial impact on your business. The monetary cost of a bad hire (such as a business development manager), for example, has been shown to exceed 30% of the person’s annual salary, according to the U.S. Department of Labor – let alone the total cost of lost productivity. The recruiting cost to fill (and refill) that business development manager or other position also doubles every time a bad hire leaves the business.
CareerBuilder survey estimates that a single bad hire can cost up to $50,000, depending on salary and level of experience (with more senior or specialist hires such as a business development manager or pricing manager costing significantly more). CEB research shows the average cost per hire to be more than $7,000 across all levels; and, in high profile pricing and commercial management roles, the cost of a bad hire has been estimated to be more than 1.5 – 2 times the employee’s annual salary.
Who is most likely to leave the business first?
The attrition rate for new hires is much higher than that of all employees combined. Current research shows that average new hire turnover is now up to 23% compared with 16% for all employees. Roughly 20% of all new hires should never have been brought on in the first place. New hires are high risk regardless of how they have been selected. Rigorous selection, evaluation and informal and regular feedback sessions with a new hire should be a non-negotiable part of the recruitment process for all hiring managers that are setting up a new pricing and commercial team.
People leave businesses that don’t care
A ‘bums on seats’ approach (as I’ve heard a number of HR professionals pejoratively refer to their own recruitment and hiring processes), does neither identify amazing applicants nor weed out unsuitable candidates. A ‘bums on seats approach’ is as crude as it sounds. It is not candidate-focused. It is not concerned about finding the right fit really. It pays lip service to the notion of fit but really is transactional; treating people as a tradeable commodity. It damages corporate brands and reputations.
A ‘bums on seats’ approach does not attract great candidates; and if on the off chance it does, a new hire will quickly realise that their position and value is neither understood nor valued and almost certainly leave the business. When good people leave businesses abruptly, HR professionals and hiring managers are left in a difficult, fire-fighting position to fill the vacancy quickly. Reworking a badly run recruitment process is fraught with risk and costs start to add up.
What are rework costs?
Rework costs are costs commonly associated with re-hiring or replacing someone. The cost of making a bad hiring decision include significant rework costs. It takes time and effort to find the right person to replace the bad hire or person leaving. If your second choice has moved on to another opportunity, then your search will have to start all over again. And, if you were using an outside agency in your search, then you’re going to be looking at a lot of money to re-advertise the position, recruit for the job and to make another hire.
Rework costs also include the cost of paying your full-time employees their hourly salary as they spend even more time finding someone new — and those numbers add up quickly. After this, you’ll have to pay even more money on additional training, introductions and policy and procedures.
Direct expenses associated with reworking poor hiring choices (i.e., recruiting, on-boarding, training processes + potential increases in compensation packages and severance pay) reduces business profitability. Rework also destroys any trust in the recruitment process among your hiring and line leaders.
Hidden costs of bad hires
The cost of bad hires goes beyond financial and monetary losses impacting morale, teamwork and productivity. Bad hires affect how well your team work together, bond and achieve collective goals. Examples of hidden costs include: low morale, interruptions to the teams and function work flow and negative perceptions about the team and functional capability and credibility.
Your teams will experience a “transition period” while you seek to replacing a bad hire with someone new. In this transition period – and while you are searching for someone to fill the role – your employees may be struggling to find normalcy in their day. Many teams find it difficult to keep up with the additional tasks they’ve been given; let alone prove themselves to be high performers. It is common to find teams attempting to overcome the impact of a bad hire by trying to plug the dam rather than moving forward. This almost never works.
Bad hires put a lot of stress and pressure on the team. People are working much harder than ever to protect hard earned margins. When there is a gap in the team, workload can become unmanageable. Overworked and stressed out people can easily lose focus on what really matters; and their individual and collective goals get drowned out by the noise. A lack of drive and focus brings teams to a standstill and this is where underperformance creeps in.
Workload pressure can also create additional burdens and costs for the business and its customers, such as: losing opportunities for new business, providing lower levels of customer service and overextending current employees. When an employee leaves or is dismissed, any projects they were working on can get put on the back burner. They will also struggle to renew the trust that has been earned with clients and scramble to ensure projects get completed. When this happens, leaders and teams feel overworked, isolated and underappreciated
- The financial costs of bad hires on your business is in its millions of dollars
- Bad hires create hidden costs like unhealthy rivalry between team mates and a toxic culture
- Some team members will feel resentment towards the person who is leaving — or towards the managers who brought that person on in the first place.
- Bad hires negatively impact productivity and service quality.
- When productivity decreases, deadlines are often missed and salary and/or bonuses are affect
See our blog on employee development plans.