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Recognizing the Costs of a 'Bad Hire'
By Michael C. Dennis MBA, CBF, LCM

Most managers and supervisors can identify the employees that would be considered bad hires. However, not everyone is aware of direct and indirect costs of a poor firing decision, which include:

  • The time and money required to train the employee. The time, effort, money and trouble needed to retrain the employee in the hope that their performance will improve.

  • The direct and indirect costs of the mistakes the employee makes while employed.

  • The indirect costs of double checking their work to make sure that some or all of their mistakes are caught before they cost the company money.

  • The damage to morale among co-workers when they see that [a] they are helping to carry a substandard employee and [b] management does not have the good sense to let the substandard employee go

  • The hidden cost involves the risk that the company and the department may lose one or more good employees out of frustration because the company does not fire the 'problem' employee.

  • The cost to recruit, interview, hire and train a replacement.

  • The increased cost of unemployment insurance to the employer.

  • Any costs associated with the company having to defend itself against administrative or legal action taken by the employee for wrongful termination.

One recent estimate indicated that the average cost of a bad hire' was one time the individual's annualized compensation. For all these reasons, companies should take steps to make better hiring decisions - and to fire workers that don't seem to be making the grade during their introductory/probationary period.

Michael Dennis is the author of a soon to be published book on human resources management and a business consultant. For information about his consulting services, please contact him at 866-460-7509

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