The average cost of making a bad hire, according to 41 percent of companies surveyed by CareerBuilder, is $25,000. The survey — conducted among 2,696 employers between Aug. 16 and Sept. 8, 2011, by Harris Interactive — found that a single bad hire can significantly affect an organization’s bottom line.
A bad hire can be measured several ways, including:
- Less productivity – 41 percent
- Lost time to recruit and train another worker – 40 percent
- Cost to recruit and train another worker – 37 percent
- Employee morale negatively affected – 36 percent
- Negative impact on client solutions
One company, online retailer Zappos, is getting a lot of attention by paying new hires — potentially before they become bad employees — $3,000 to quit their job with Zappos. In the book Delivering Happiness, by Zappos CEO Tony Hsieh, he outlines the process of new employees receiving “The Offer.” Zappos offers new hires the wages they have earned for the hours they have worked during their initial training period, plus an additional $3,000 to leave after, their initial training period. This offer is offer expires within 24 hours of being offered. Hsieh says only 2 percent to 3 percent of people take the offer. The other 97 percent say no — they choose the job over the instant cash.
Considering the cost of having a bad employee, this program makes a lot of financial sense. Zappos is able to quickly identify employees, who by their willingness to accept the $3,000 offer, self-select out of the company, at a relatively low cost. By removing an employee who doesn’t want to be a part of their organization, Zappos saves on future hassles and headaches that far exceed the money paid to the employee, as they exit stage left.
I believe what this process has done for Zappos is to help them truly define, in the early candidate screening stages, what a good employee looks like for their culture. By putting the burden of successful recruiting upon their Human Resource department to select new employees who will be a good fit, front-line managers will have an easier time of retaining talent by creating a place that eager employees want to work.