The Cost of a Wrong Hire and Why Background Verification Is a Must in 2022

cost of a wrong hire

Every employer today is fighting a war against wrong hires. They never want to lose out on the best talents and resources. They might depend on a few websites and tools to make this happen. 

But wouldn’t it be a wrong choice while you invest huge bucks in enhancing your hiring process while your employees end up fidgeting with the bad hire.

Zappos CEO Tony Hsieh estimated that bad hires had actually cost the company nearly $100 million.

In this article, we’ll discuss the real cost of a bad hire and why a background check is a must!

The Real Cost of a Bad Hire

Every bad hire is equivalent to a rotten apple. They take pleasure in spoiling the work culture and the mindset of the team members. You can calculate the overall impact as follows:

Quantitative Loss

Every bad hire can bring down the chances of leveraging an organization’s resources productively. You might invest in coaching, training, and mentoring along with disciplinary actions and performance reviews. 

Be it spending on administration and designing tools, your overall effort wouldn’t prove fruitful. When the employee leaves, you might have to restart it. This would cost you a lot in terms of financial burdens and loss of productivity.

The average cost of one bad hire is nearly $15,000! (Source)

The Undercover Recruiter reports bad hires can cost $240,000 in expenses. Those are broken down into costs related to hiring, pay, and retention. (Source)

Additionally, here are three points to consider when trying to determine the cost of a poor hire:

  • The higher the position (and thus higher the salary), the higher the cost of the wrong hire 
  • The longer the ill-placed person has worked at the company, the higher the cost of the bad hire
  • The more training wasted on the person, the higher the cost of the bad hire

Qualitative Loss

While any bad hire can imply productivity loss, it is often the good employees who need to compensate for the old and forgotten misgivings. This can pave the way for deprivation among top performers. Remember, this hullabaloo can keep dragging long after the bad employee has left the organization.

Research states that 43% of companies got fizzled up with bad hires since they had to hire a person ASAP.

A bad hire can have a negative impact on co-workers and the team as a whole. If they are in a leadership position, the impact can be much worse. Self-motivation often relies on environmental factors. If the environment is negative, it can be challenging to be motivated at work. A bad hire can make it difficult for a team to meet their goals. That’s because a co-worker or team will be hesitant to work with them and vice versa.

They can impact everything from the cost of screening, assessments, candidate selection, as well as other hiring processes such as technology and travel costs. From exit formalities to severance packages, everything would come under the radar of a bad hire. This can have serious impacts on the overall business culture.

To avoid such unpleasant situations, businesses have to forgo hasty hiring decisions. A bad hire can pose a long-term threat, whereas a good hire can let you win a fortune. Employee background verification can help you make smart hiring choices.

Why Background Verification Is Must

There are six compelling reasons to run background checks on all job applicants:

Avoid Bad Hires

Background verification plays a crucial role in making better hiring decisions. 84% of employers continue to derive significant benefits from background checks.

Appropriate background screening can help you hire right by verifying all the relevant details, so you don’t have to let go of your hire later.

Knowing as much as possible about your potential hires is crucial. After all, the individual you hire will have access to critical data and documents that belong to your organization.

Here are three steps that can lower the risk of a bad hire:

  • Prepare a list of traits and characteristics that you’re looking for in a potential employee.
  • Assess how you will gather the data necessary to make a successful hiring decision.
  • Armed with the right data, be strategic with the interview process to find the right people.

Verify Candidate’s Qualification

You should never solely base a hiring decision on the review of a candidate’s social media profile. Tailor the screening process to reflect your industry and the jobs for which you hire. 

Prospective job candidates who are not properly screened can negatively impact your organization. For example, an individual who misrepresents their education or work experience may not produce high-quality results.

75% of HR managers have caught a lie on a resume, according to a CareerBuilder survey. The resume can no longer be considered as a reliable source of information about the prospective employee. A thorough verification (includes education, employment, and reference verification) may reveal some alarming facts that could impact your hiring decision.

Background checks enable organizations to make intelligent decisions by hiring only those candidates who have the required skills and have the right attitude and behavior to be a perfect cultural fit.

Keep Your Workplace and Customers Safe 

Think transportation, finance, day-care, healthcare, and education, where employees are in direct contact with customers. Employees who may have access to sensitive customer information can be a threat to their safety. 

Food delivery company Zomato rejects about 25% of applications due to various reasons such as unavailability of proper documents, failure in background check clearance, and lack of right intent to work as a delivery partner.

Avoid Negligent Hiring Liability

Negligent hiring can cause harm to businesses, employees, and clients. When you’re hiring an employee, you need to make sure they have cleared a background screening. This helps avoid unnecessary risks and reduce insurance liability in adverse scenarios. 

Suppose you’re hiring a delivery executive for your e-commerce business. In that case, you need to make sure that they have a valid driving license without any strikes. In case they end up in a road accident, remember that you will be liable for them. 

Protect Company Reputation

A company is made of and known by its people. Employees are the face of the company, and their decisions and actions directly impact the company’s performance and brand reputation. Company image can influence the sales and even the price of its products or services.

It is necessary to do a thorough background check of the executive before bringing him on board. When you hire individuals who are dangerous or unsavory, it leaves a wrong spot on your name. Not to forget that it might also compromise the integrity of your brand. 

Avoid Criminal Activities

Conducting criminal background checks is a crucial step in bringing an employee on board.

An individual’s criminal history affects not only a company’s safety but also job performance and qualification. If you are hiring a stock manager who handles inventory and funds (the job requires a high level of trust), it’s important to see if the individual has ever been charged with theft or fraud.

While it might not always mean rejecting the applicant, it could refer to minor modifications in the hiring contract. But the point is that unless you have the complete background information, there is no way you can make an appropriate decision. 

A Quick Recap

So what have we learned from our quick drive through the background screening process? 

  • With each shortcut to the recruitment process comes an associated risk to your company. 
  • There are many costs associated with a bad hire, some direct and some indirect, which can be better mitigated with a thorough screening program. 
  • There can be a high price to pay for companies who don’t check their candidates’ education and professional credentials. 
  • Background screening can help manage this risk and identify candidates with reportable criminal activity history to help inform your hiring decisions. 

When it comes to employment screening, we believe it’s better to be safe than sorry. A background verification solution will filter out the bad, retain the best – key for a harmonious work environment and steady business growth.


Pawan Kumar

I'm a Content Marketer at Springworks. I've been featured in many reputed publications and online magazines! I'm an avid reader and movie buff. Let's connect on Social Media.

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