What is the cost of a bad hire?

Regardless of your size from start-up to global enterprise, the cost of a bad hiring decision can cost more than you think.

The obvious costs are financial but it’s more than this.

It’s the time, resources, and impact both internally (staff morale, potential increased employee churn) and externally the potential negative impact can sometimes be hard to pinpoint the true cost.

When speaking to many start-ups we are often told “there are not enough hours in a day” and often find when hiring that:

  • They don’t always find the best or right people – especially for senior leadership VP positions and Tech hires
  • Leave positions open – It’s not uncommon for positions to remain open for 6 months + leaving the existing team to pick up the additional work
  • Less time to focus on the day job/strategy/product build or service

So, what is the cost of a bad hire? Dr Bradford Smart estimates this cost to range from 5 to 27 times the person’s salary

The cost to calculate this would include:

  • Total cost to hiring the person – Recruitment / Search fees, Testing or assessments, relocation
  • Compensation – Base, bonus, stock, Benefits
  • Onboarding / Employee Costs – Training, travel, courses, conferences, equipment
  • Severance costs – Admin costs, Legal advice, Severance fee, Worst case scenario – Cost of a lawsuit caused by the person
  • Mistakes, loss of business opportunities – Lost revenue, delay in workload, or missed deadlines
  • Disruption – Employee churn, and low morale leading to low productivity/ output (for example a salesperson with a quota $500k only delivering $300k = $200k cost)

This cost can quickly escalate, a candidate on $100k base getting this hire wrong could cost $500k.

The main reason many startups decide against a specialist recruitment partner is cost.

Using the calculation above this cost is between 3-5% of the total cost of a bad hire, does this cost still look like a bad deal?

Over 80% of candidates Halak’s team have placed remain in post 2+ years

Why your start-up needs a staffing partner

We understand having the right talent onboard at the right time can make or break a growing start-up.

By engaging a Halzak a SaaS Specialist Recruiter to handle recruitment this will:

  1. Broaden your reach outside the usual advert / jobboard responses. Gain access to our personal networks
  2. Reduce time to hire – from months to weeks. Typical days to hire for companies hiring themselves can be anything from 38 – 64 days (For many start-ups we work with it’s not uncommon for roles to be left unfilled for up to 6 months!!) Our typical time to hire is 2-3 weeks
  3. Give you back valuable time – no more time sifting 100’s of add responses and still not having access to the best talent available
  4. Work as an extension of your brand, HR and/or Talent team

A bad hire isn’t always easy to spot, but it’s easier when interviewing and assessing talent all day every day is what you do.

Working with a trusted recruiting firm that’s looking out for you can reduce the headache that hiring can cause. Our team has over 20 years of recruiting experience and can look for candidates who meet your cultural fit and spot red flags during the process.

If you’re interested in learning more about how Halzak could support you, please get in touch!

Connecting People Who Modernise The Business World

Halzak – SaaS recruitment specialists

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