Avoiding a bad hire isn’t just about the hassle of reopening a job, sifting through applications, and onboarding another employee. It’s a costly mistake that averages about $17,000 for most companies.
Apart from pay and recruiting expenses, there’s also the opportunity cost of lost output and even more time and money invested in finding a successor. Simply put, it’s a talent acquisition nightmare you want to avoid at all costs (pun intended).
What happens if you do make a bad hire? Well, first, don’t beat yourself up. It’s a common hiring mistake, honestly, but every mistake is a learning opportunity.
While you may lose some time and money, you can use the experience to improve your recruitment process and prevent future bad hires. We’re here to show you how to do just that.
TL;DR — Key Takeaways
Bad hires lack the skills and competence to do the job. As a result, they underperform, don’t fit into the company culture or the rest of the team, have negative attitudes, and more.
The cost of a bad hire is around $17,000, but it depends on the specific company and role. It involves direct and indirect costs.
For handling bad hires, try the following: assess the situation objectively, communicate openly and provide clear feedback, offer support and resources for improvement, develop a performance improvement plan, consider reassigning them to a different role, and finally, make the difficult decision compassionately.
To avoid bad hires, define clear job descriptions and expectations, use structured interview processes, implement skills assessments, and foster a collaborative hiring approach.
What actually is a bad hire?
If a new employee has just started in a role and is not performing up to par, you can easily confuse them with a bad hire. However, they’re different (give the new guy some time to adjust, geez!).
New employees who are just learning the ropes can be amazing team members after a while. Most are, actually. Wrong or bad hires, on the other hand, can do detrimental damage to your company.
Here are some tell-tale signs you’re dealing with a bad hire:
They are consistently underperforming.
Their values and behavior don’t align with those of your company.
They do not fit in well with the rest of the team.
They have a negative attitude towards work, the company, coworkers, and customers.
There is a lack of initiative, and they won’t tackle work unless someone instructs them.
They behave unprofessionally: arrive late to work, miss deadlines, act rudely towards customers, etc.
They resist change and have no flexibility in their behavior at work.
They have poor communication skills and struggle with receiving and providing feedback.
They behave unethically, breaking work conduct rules, giving confidential information to competitors or partners, etc.
They can’t solve problems or think independently.
If you’re questioning your hiring decision and the person in question is showing most of these signs, you may have made a bad hiring decision.
The cost of a bad hire
The total cost of a bad hire is around $17,000 for every mishire. However, not all of these costs can be tied straight back to cold hard cash. Sometimes, they’re a bit more nuanced (and therefore often more costly because they often go unnoticed).
There are two types of costs to watch out for.
There are two types of costs to watch out for.
Direct costs of a bad hire
Direct costs are the type that comes with an invoice, such as placing a job advertisement on a platform like LinkedIn or various other costs in the recruiting process. Specifically:
Recruitment costs: Expenses for job boards and postings, recruitment agencies, background checks, interviews, test tasks, test days, and other parts of the recruitment process.
Training and onboarding costs: Training materials and any downtime of your existing employees because they’re training or onboarding new hires.
Separation costs: Severance pay, legal fees, and outplacement services.
Re-hiring costs: The cost of your hiring team restarting the entire hiring process.
Indirect costs of a bad hire
This is the damage that you can’t really financially quantify. If you hire the wrong employee, you can expect to pay indirectly for:
Productivity Loss: Decreased output of the new hires and the team disruption that they cause.
Performance Impact: Lower quality of work and increased errors for new hires.
Employee Morale and Engagement: Lack of motivation or an increase in stress if the rest of the team has to cover for the new employee.
Customer Impact: Lower customer satisfaction and long-term reputational damage.
Legal and Compliance Costs: Legal risks, such as wrongful termination claims and disputes, and the cost of complying with state and country laws during your hiring processes.
Opportunity Costs: The cost of any lost business opportunities as a direct result of the bad hire.
Long-Term Impact: All of the above culminate in long-term consequences.
Top tip:
Determining the actual costs of a bad hire for your business is difficult, as the total loss depends on many different factors. When reporting on bad hires, remember to track the same metrics for each new hire in order to have comparable data.
6 tips for handling bad hires
Uh-oh…you’ve hired the wrong person. That’s unfortunate (for you and the hire), but it’s not the end of the world. What can you do to remedy the situation quickly? Toggl’s talent team had a few actionable tips for managing a bad hire.
1. Assess the situation objectively
To make sure you’re actually dealing with a bad hire, you need to assess the situation from multiple angles. You want to ensure that it’s not just someone finding their way in a new role.
To do this, talk to this employee’s colleagues, managers, and team members. Ask about their performance, collaboration, drive to work and think independently, meet and exceed expectations, and more.
Try to discern if the employee has issues that can be resolved through training (such as inadequate knowledge of certain tools or processes) or if they are actually a bad fit that can’t be fixed with guidance and support
2. Communicate openly and provide clear feedback
If you feel you’ve made the wrong choice, reflect internally and then communicate with the employee.
To deliver constructive feedback, first document your concerns and explain which situations made you think this person is underperforming.
Then, schedule a private meeting in which you can directly and honestly explain why you’re worried.
Top tip:
What does ‘clear’ feedback actually look like? Be specific. Here’s an example: “In the last quarter, your project deadlines were missed three times, and that really impacted the rest of the team’s progress. I’d like to dig deeper into why this happened and discuss ways to improve it.”
3. Offer support and resources for improvement
Before you decide to fire an employee, give them a chance to turn things around. Offer them resources and materials to learn on the job, such as training materials, mentoring from the team’s senior employees, courses, workshops, and more.
Offering help to a struggling employee not only improves your employer brand in the long run, as it shows hires you’re invested in them and their success, but it’s also often what most employees need to succeed.
61% of HR teams say a lack of clear advancement is the second-biggest driver of employee turnover. According to Gallup, only 29% of employees say they feel fully prepared for their new role and ready to excel after their onboarding.
Oftentimes, employers overlook this important step and immediately jump to the conclusion that the new hire is a ‘bad’ one when, in reality, they just haven’t been set up to succeed.
4. Develop a performance improvement plan
A performance improvement plan (PIP) is a specific set of actions an employee must do to improve their performance.
To set up a PIP, you’ll have to go through the following steps:
Gather documentation: List examples and instances of poor performance, feedback provided by other employees, and other proof of the negative impact in the workplace.
Define clear objectives for the PIP: Clearly explain the goal of the performance improvement plan: to assist the employee in delivering work that meets the company’s standards.
Outline performance issues: Describe the specific areas where the employee needs help.
Set specific improvement goals: Set SMART goals that will help you identify when an employee has met the goals of the PIP. For example, improve the results from PPC campaigns by 15% in 60 days.
Develop an action plan: Outline the steps the employee should take to reach the PIP goals, such as attending training sessions, meeting with mentors, taking courses during work hours, etc.
Identify resources and support: Determine what you will provide from the company side to help the employee meet the goals of the PIP.
Establish a timeline: Set a realistic time frame for the PIP, typically 30 to 90 days.
Define monitoring and feedback mechanisms: Describe how you will monitor the employee’s progress.
Specify consequences: Determine what happens if the employee does not meet the conditions of the PIP: reassignment, further disciplinary action, or termination.
Create the PIP document, hold a meeting, and have the employee sign it: Create an official document and meet up with the employee. Both the manager and the employee should sign the document.
Monitor progress and provide feedback: Review the employees’ performance regularly to see if they are meeting their goals. Schedule regular check-ins to discuss progress.
Evaluate the outcome: Decide whether the employee has passed their PIP with flying colors or if they should face the previously established consequences.
Top tip:
A performance improvement plan can differ slightly from an employee development plan. However, to help you get started crafting your plan, you can use our free employee development plan template. Make a copy and tailor it to fit the performance needs of the employee in question!
5. Consider reassignment or role adjustment
Even if you’ve made a bad hire, it doesn’t necessarily mean it’s the end of the road for them at your company, as a bad hire for one role could turn out to be a great hire for another. Depending on their skills, you can reassign them to a different role. For example, you may hire a customer success manager who works out better in customer support.
If the human resources team works with the candidate to discover their strengths and interests, it’s possible to assign them different responsibilities within their existing role or an entirely different role.
Aside from evaluating the areas where the employee isn’t meeting expectations, determine the areas where they really shine. After a talent gap analysis, you’ll see if those skills can be used in different roles or departments.
6. Make the difficult decision compassionately
Sometimes, you have to face the music and tell the new hire goodbye. When you do so, make sure to do it with professionalism and compassion. To do it properly, walk through this process:
Review the company policies: Ensure you understand the legal requirements
Gather documentation: PIP records, performance records of the issues the employee faced
Plan the conversation: The location and time, the talking points
Coordinate with human resources: Have someone present during the call or face-to-face meeting to determine the severance pay and benefits
Be clear and direct: Start with the decision, explain the reasons for letting them go and avoid having debates
Show empathy: Acknowledge the difficulty of the decision, take some of the blame, and listen to what the employee has to say
Discuss logistics and next steps: Severance and benefits, return of company property, outplacement support
Prepare for immediate aftermath: Have IT lock the employee out of important accounts, decide when and how to inform the rest of the team about the employee leaving
How hiring managers can avoid bad hires in the first place
Even the best team and hiring manager can make a bad hire, but you don’t have to make the same mistakes twice if you spend some time preparing in advance. Here are some of the ways to prevent hiring the wrong person in the future.
Define clear job descriptions and requirements
Your job descriptions can sometimes make or break a hire. If they are laid out accurately and clearly, they will encourage the right applicants to apply. Here is a checklist to do them properly:
List the specific skills needed for the role (and be realistic)
Don’t forget the soft skills
Add the qualifications, splitting them into must-haves and nice-to-haves
List the required experience in the same or similar roles
For example, a job description that is too vague can lead to a large number of unqualified applicants. If you’re hiring a project manager with any background, you might end up shortlisting applicants with experience in sports journalism, while you require someone with a background in cybersecurity.
Top tip:
Never copy and paste job descriptions from other companies or websites. This is a surefire way to miss the mark. Take time to think about the exact skills this new hire needs to succeed, not only in their day-to-day role but also within your unique company.
Use structured interview processes
During the interview process, every candidate should receive the same set of questions in the same order, preferably asked by the same people.
With a structured interview process in place, you can be more objective when assessing candidates, and there are fewer chances of making a mishire.
Top tip:
Prepare a list of behavioral and situational questions that align closely with the competencies and skills required for the job. If possible, create a standardized scoring system that the entire team can use to determine the most qualified candidates.
Implement skills assessments
The best way to determine if someone will perform well in a role is to test their skills before they even reach the interview stage. Instead of asking candidates to send in a resume and cover letter, ask them to complete a quick 15-minute skills test.
Tools like Toggl Hire have hundreds of tests for different roles and skill sets, allowing you to test the soft and hard skills used in each role. Candidates complete the test, and within 15 minutes, you find out who your most qualified applicants are.
The best part is that everyone who takes the test gets feedback almost immediately after completing it.
Foster a collaborative hiring approach
Having multiple members of your team assess candidates helps maintain objectivity and reduces bias. Everyone on the hiring team has a different background, and they can weigh in on how suitable the candidate is for the job.
Hiring collaboratively may not completely eliminate the possibility of making the wrong hire, but it can significantly improve your chances of hiring the right one.
Improve your hiring process with Toggl Hire
Toggl Hire helps you assess whether candidates can do the job before you even interview them. Instead of resumes, let prospective candidates take a quick skills test. In 15 minutes, they will find out if they have what it takes to do the job, and you will get a shortlist of top-quality candidates.
This can help you speed up your screening process, spot red flags early, and remove bias from the hiring process. Until you see their test results, all candidates are treated the same.
The best part? You get all of that alongside regular full-cycle recruitment software features, including candidate management tools and a custom candidate pipeline. Start improving your hiring process and avoid bad hires with a free Toggl Hire account.
Mile is a B2B content marketer specializing in HR, martech and data analytics. Ask him about thoughts on reducing hiring bias, the role of AI in modern recruitment, or how to immediately spot red flags in a job ad.
