Ouch! What Are the Costs of a Bad Hire for Small Businesses?

Man looking stressed after making a bad hire

Gone are the days when you could minimize the consequences of hiring mistakes by "finding a place" for a bad hire who isn't fitting in.

Especially for small businesses, with fewer layers of management, all employees must carry their own weight. They need to do their jobs with less supervision and greater technical aptitude. The problem? Not everyone flourishes in this kind of environment.

Your company can lose big after all the time it takes to recruit, interview, hire and start the onboarding process for someone new, just to find out you picked the wrong person. It happens more often than you may realize.

In a recent Robert Half survey, 62 percent of the small business owners said they’ve made a bad hire, and more than half (56 percent) said they've settled for a candidate who was not as qualified as they would have liked.

Here are four ways a bad hire can drain your energy and disrupt your business. Appropriately, as an acronym, they spell OUCH.

Opportunity costs of a bad hire

Consider the business you stand to lose when the bad hire interacts damagingly with clients or causes you to repeat procedures that were handled ineptly. You also waste time and lose productivity along the way.

Sixty-nine percent of the small business owners polled who said they’ve hired the wrong person said they also experienced a loss of time. And we’re not just talking about a few hours. Thirty-four percent said they wasted more than 50 hours when they hired the wrong person.

For others — 36 percent of the respondents — productivity was affected most by a bad hiring decision. Workplace productivity, sometimes defined as the amount of output produced per work hour, can make or break a company.

Unhappy workers

What, more? A staffing mistake puts pressure on other employees who must pick up the slack. Thirty-eight percent of the small business owners said making a bad hire lowers staff morale.

Want to keep your employees happy? Here are six ways to improve employee retention.

It doesn’t feel good, either, for the hiring managers who brought in the wrong person. Almost three-quarters of them (73 percent) said they felt frustrated, almost half (47 percent) were stressed, and 36 percent felt discouraged.

Compensation and other expenses

All of this equates to a loss of money, the bottom line. A quarter of the small business managers in the survey who have made a bad hire said there had been a monetary cost.

Hiring process all over again

Of course, the expenses and productivity problems continue even after you cut your losses and dismiss the bad hire, because you still need to go through the hiring process and find a replacement.

According to another Robert Half survey, it takes four weeks, on average, to fill an open staff-level accounting or finance position, and five weeks to hire for a management-level role.

The moral of this OUCH-of-a-story: In the long run, it's more difficult for small business owners and managers to accommodate a poor performer than it is to invest in recruiting quality candidates. If you need to hire and don’t want to make costly hiring mistakes, consider bringing in someone on a temporary basis so you can evaluate their career skills or their fit with your company before making a full-time offer.

Robert Half has the expert know-how and resources to help you avoid making a bad hire. Let us assist you in finding the right person for your small or midsize business.


Call Accountemps at 1.844.653.5172


Costs of a Bad Hire infographic

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Editor's note: This post was originally published in January 2014 but was updated recently to reflect new information.

Tags: Hiring