The Selection Process:
How Much Do "Hiring Mistakes" Cost?

Great people make great teams. Great teams make great companies. The key to sustaining success is hiring and retaining the right people.

Hiring mistakes cost more than just a paycheck. A poor hire can result in loss of reputation, annoyed customers and lost income, as well as "hidden" expenses such as team morale.

Cost of Termination
Processing out an employee takes time: removing the individual from the company payroll, taking their names off the security lists, and collecting company property can take hours.  There are often benefit program extensions, too. These costs often run between $1000 and $1500.   
     
Cost of Replacement
If the departing employee has to be replaced, the average cost of hiring and orientation for a non-exempt employee was about $1,100 (Saratoga Institute - 1999 Human Resource Financial Report). The average cost of hiring and orientation for an exempt employee was about $9,000 (Saratoga Institute).  These figures will vary from one company to another.     
 
Cost of Vacancy
Assuming that a job adds value, your company will experience a loss of revenue for every day your position is vacant.  The amount of loss depends on the position. You can calculate the Cost of Vacancy as follows: 

* Take the total annual company revenue per employee and divide it by the number of workdays in the year (usually about 240 to 250).
* Multiply this number by the number of workdays that the job is vacant. 
* Subtract the cost of pay and benefits for those workdays since they were not paid out. 
 
Learning Curve Productivity Loss
There is an observable loss of productivity until the new person's productivity matches the departing person's.  The minimum loss is usually about three to six months pay and benefits for exempt employees and about twelve months pay and benefits for a non-exempt employee (Saratoga Institute).  The cost of replacing a salesperson or a manager is often far greater than the turnover cost of a non-exempt employee.    

When you consider the costs of benefits, taxes, insurance, severance, legal expenses, training costs and management time PLUS the impact of unmet quotas and lost sales, hiring the wrong person can cost your company a substantial amount of money. When you add in the intangibles such as team morale and customer satisfaction, the cost increases; and that's before you have spent money on a re-hire.

Avoid these Financial Drains by HIring the Right Person for the Right Job

If you are relying on interviews to evaluate a candidate and evaluating "personality" instead of job skills, if you have too many crieria (or too few!), and if you are using yourself or other successful people as models as for success, you could be at risk for making a hiring mistake.

Corporate Initiatives Specializes in Getting the Right People into the Right Jobs

We use statistically validated testing to predict job skills most critical to success. We reasearch why people have failed or succeeded in previous jobs. We help you avoid costly mistakes so you can get on with growing your business into a championship company.

Call or email us today at 610.642.1796 for expert assistance