How Much Does Losing One Employee Really Cost?

How Much Does Losing One Employee Really Cost?

Every day a position remains open, the company trying to fill that job loses money. After all, a vacant position means exactly zero productivity in that role, and the search to fill the vacancy means time and money spent on recruiting. In 2017, Forbes estimated that the average annual cost of job vacancies in the tech industry alone was $20.1 billion. 

There’s no doubt job vacancies cost companies money, but do you know what’s actually more expensive? Rushing to fill a vacancy with a bad hire.

The Wrong Person For the Job

Every recruiter has been there. Faced with a position that has gone unfilled for weeks, or even months, hiring often becomes about picking the best applicant available—not necessarily the best applicant for the job. A 2017 Career Builder survey found that nearly 3 out of every 4 employers have made a bad hire. There’s nothing uncommon about this mistake. 

Hiring managers and recruiters often know the person they are onboarding isn’t the right fit. It’s just that without any better options, they convince themselves they can make it work—until it doesn’t. 

A bad hire can be someone who doesn’t fit in with the current company culture, doesn’t have the training or experience to jump into the role, or doesn’t have the passion the job requires to be successful. These deficiencies can often morph into much bigger issues over time, with employers telling Career Builder they saw a 37 percent dip in productivity and a 31 percent reduction in the quality of work produced due to bad hires. 

Of course, bad hires also end up contributing to high attrition rates. If a company is lucky, the bad hire is the only one that ultimately leaves—but sometimes, they take other employees with them. The result? Even more empty seats that need to be filled. 

Evaluating the Costs

In case it hasn’t been made clear yet, the cost of a bad hire isn’t always quantifiable. The impact they have on company culture and productivity can have far-reaching consequences, lingering for long after they’re gone. 

This is why the Society for Human Resources Management (SHRM) says the cost of a bad hire can be “astronomical.” Northwestern puts the cost at 30 percent of the employee’s anticipated first-year earnings, and the CEO of Zappos told Forbes their bad hire cost was over $100 million. 

Individual costs will, of course, vary. One thing is clear, however: A bad hire can be far more costly to a company than simply allowing a vacancy to remain open until the right fit comes along. 

Finding the Right Fit Fast

Of course, there is one alternative that beats both leaving a vacancy open and rushing to fill it with the wrong person: finding and hiring the perfect candidate for the job as quickly as possible. 

It seems ideal, right? Maybe a little bit impossible? It’s not, though. One of the benefits of Censia is the system’s ability to scan through thousands of online profiles in search of exact matches to what the company is looking for. This type of active recruitment not only helps companies identify people who may not have otherwise been looking for a job, it also helps eliminate bias by evaluating potential hires based on objective qualities and skills

If a company simply puts out a call for applications and relies on a recruiter to sift through those applicants in search of the best fit, the likelihood of making a bad hire goes up exponentially. Not only because the right fit may not be actively searching for a job (and therefore isn’t likely to apply on their own), but also because the recruiter is only human, and therefore prone to human error. The right candidate could very well be overlooked because of subjective judgments the recruiter doesn’t even realize he or she is making. 

Then, once all the applicants have been evaluated, hiring managers may feel pressured to simply make a pick—even if none of the applicants feel right. 

Active recruiting software eliminates many of those risks, increasing the odds of making the right hire the first time around—and cutting the cost of a bad hire completely.

Further Reading

How Much Does Losing One Employee Really Cost?

Censia’s Commitment to Diversity, Equity and Inclusion

Read more
How Much Does Losing One Employee Really Cost?

Forget the Glass Ceiling. Here’s how to fix the Broken Rung.

Read more
How Much Does Losing One Employee Really Cost?

The 5 Most Effective Talent Management Strategies

Read more

Want to see Talent Intelligence in action?