Just how costly is a bad hire? It depends on who you ask. If you were to Google “cost of a bad hire,” you’d find percentages, arguments, and even calculators promising to show you the “true cost of a bad hire” while offering little insight beyond the fact that they cost more than the worker's salary and turnover. As a result, the discussion on the direct and indirect costs of bad hires has become somewhat obscured. Some sources cite the “astronomical costs” of an unfortunate appointment while offering few measurable impacts, while others claim that a bad hire costs $240,000 while citing outdated and unavailable sources.
None of these sources tell you how often you’re making a bad hire, making it hard to know how these figures apply to your company. They often don’t tell you how the calculations are made or where the numbers come from, making it impossible to say whether the issue is of genuine business concern. When it comes down to it, they offer vague ideas about how to definitively avoid paying the costs of a bad hire. All of this has led HR to rely on "hope for the best" approaches to personnel management, with no clear insight into their hiring risk or effective actions they can take to manage it.
How much are toxic hires costing your organization? Relative to hiring a standard, non-toxic worker, a single toxic employee on a team of 20 will cost $25,600 per year due to increased voluntary turnover and absenteeism alone. This means that a company of 1,000 employees is losing at least $1.2 million to toxic workers each year…
From a young age, we’re taught to go to the doctor regularly to catch potential health issues before they arise. But as we all know, many people wait until something goes wrong before they seek help. Rather than work to stay ahead of potential illness, people fall into the trap of thinking they’re invincible. Unfortunately, we see many companies make this same mistake. When it comes to managing their workforce, companies are notorious for choosing the emergency room when regular, preventative care would have done the trick.
Now that employee conduct and culture are becoming increasingly tied to a company’s reputation, companies who limit their background checks to the hiring process are missing a wealth of critical information about their hiring risk. According to the Bureau of Labor Statistics, the average employee has a tenure of 4 to 10 years. This means that companies who rely exclusively on pre-employment background checks may be missing up to 10 years of important job-related issues per employee.
There’s a lot that can happen after an employee is hired. A senior level director may play nice during the interview but later take to the internet to publicly shame a fellow employee. A customer service rep may clear the background check and later embezzle funds from customers. A government employee may pass a 12-step interview process and security clearance and still be found to have engaged with terrorist activity. In each case, the employee displayed red flags that could have alerted the employer and helped them stop the issue. Instead, the employer missed the signs and was left asking, "How did we miss this?"
What are the costs of sexual harassment?
Companies have long known that sexual harassment can lead to costly lawsuits. But since the explosion of #MeToo and the fall of Harvey Weinstein, the costs of misconduct have grown. Today, harassment is no longer just a cultural or legal issue, but a financial and brand issue that reaches every corner of the company. That means that no matter how good your training and reporting may be, they’re no longer enough.
Story after story has shown that when a brand loses authenticity over sexual harassment, they also risk losing their hard-won earnings. Uber has lost nearly 15% of its market share over the two years of its harassment scandals. After it was announced that Steve Wynn had received multiple allegations of sexual harassment, Wynn Resorts lost $3.5B in company value.
Your company should be armed and prepared to deal with toxic behavior as well as the brand damage that results when people hear about it. Companies are owning up to faults and taking action faster than ever when CEOs misuse their power. If you turn a blind eye to identifying and preventing toxic behavior, you’re risking more than legal fees and turnover—you risk irreparable damage to your market share, merger outcomes, and your name…
TV and film studios are scrambling for ways to protect themselves from the controversy and expense of a social media scandal, without having to actually read through thousands of old tweets. The proliferation of digital content has outpaced the industry’s tools for staying on top of it all, leaving companies wondering what to do—and who will be next.
With Roseanne's scandal costing over $60 million in lost ad revenue and Gunn being just the latest star to run into financial and reputational losses over online content, it has become clear that Hollywood has deeply entrenched issues when it comes to screening and managing stars for reputational risk online. At this rate, the industry is slated to lose over $1 billion in the next year over social media issues alone.
Shouldn’t companies be able to mitigate risk up front, before another high-profile social media or sexual harassment scandal arises…?
Standard background screening methods can help uncover and verify some valuable info. They help ensure that a candidate actually went to certain schools, worked for certain companies (with the correct titles and at the correct times), and didn’t commit criminal offenses. Depending on applicable state laws and company interests, they may also help spot drug usage and excess spending. With all these methods in the tool belt, why are we still on edge about who we’re hiring?
The reality is that traditional background checks don’t catch everything they should. Even when all of your background checks have done their jobs correctly, none of these checks will accurately predict a proclivity for criminal, toxic, or unprofessional behavior—and that means a clean ‘background check’ may still miss indicators of trouble to come.
While you might feel that your screening methods have been sufficient, the truth is there might be more falling between the cracks than you realize. In a time when companies in all industries are at risk, companies need a new safety net for their hiring process to capture massive volumes of user-generated content, and internal systems to manage a complex workforce that can make or break their company…