Join us as we delve into the intricacies of this often-overlooked aspect of recruitment. We'll uncover the hidden costs, explore the far-reaching consequences, and shed light on why getting it right the first time is crucial for any business's success. So, sit tight and let's uncover the truth behind the cost of a bad hire.

Our story starts here.

Picture this: a bustling office, the hum of productivity in the air, as a team eagerly anticipates the arrival of their newest member. Let's call him Alex. The company, let's say a cutting-edge tech startup, spared no expense in their quest to find the perfect addition to their team.

The journey began with a meticulously crafted job advertisement, showcasing the company's culture, values, and the exciting opportunities that awaited potential candidates. It was plastered across job boards, social media platforms, and industry networks, drawing in a flood of eager applicants.

With great anticipation, Alex was welcomed aboard, greeted with open arms and high hopes for the future. The onboarding process was thorough, with Alex being introduced to his new colleagues, immersed in the company's culture, and provided with all the tools and resources he needed to hit the ground running.

But as days turned into weeks, and weeks turned into months, it became increasingly clear that something was amiss. Despite the initial promise he had shown, Alex struggled to adapt to the fast-paced environment of the startup. Deadlines were missed, errors were made, and tensions began to rise within the team.

Efforts were made to support Alex – additional training, mentoring sessions, and constructive feedback – but it soon became apparent that he was simply not the right fit for the role. The decision was made, albeit reluctantly, to part ways with Alex, and the company found themselves back at square one.

// Pause //

Let’s pause our story there and break down the monetary impact of the time and hours lost in this scenario:

Recruitment Process:

Crafting the job advertisement, posting it on various platforms, and screening applications likely took around 20 hours of HR personnel time, equating to approximately £800 (assuming an hourly rate of £40).

Conducting initial interviews and shortlisting candidates could have taken another 15 hours, costing an additional £600 – and that’s being super generous (IYKYK).

Interview Process:

If three rounds of interviews were conducted involving multiple team members, each round lasting around 1 hour, that's a total of 9 hours. At the same hourly rate, this amounts to £360 – and that’s just for Alex, say you shortlisted down to 3 people for interview, that’s £1080.

Onboarding and Training:

Onboarding Alex, including orientation, setting up accounts, and initial training sessions, might have taken around 10 hours of HR and team members' time, equating to approximately £400.

Lost Productivity:

But here’s where it gets eye-watering. Assuming Alex worked for three months before it became evident he wasn't a good fit - which based on the average salary of a Business Development Representative in the UK (at time of writing), totalled £11,250 (annual salary of £45,000). And estimating a conservative 10% decrease in team productivity due to his inefficiency, let's say this amounted to £5000 in lost productivity across the team during this period.

In total, the monetary impact of the time and hours lost in this scenario could be roughly £18,330 (and that’s conservative). And this figure doesn't even account for the intangible costs such as decreased team morale, potential damage to client relationships, reputation and the additional time and resources required to restart the recruitment process. It’s a big hit to take financially, and it got our tech start-up nowhere.

You might be wondering: why did our company decide to take on recruitment by themselves? Was it simply a matter of wanting to avoid paying hefty recruitment fees? Let's delve into that a bit.

For many businesses, especially startups and small to medium-sized enterprises (SMEs), the idea of shelling out a significant portion of their budget on recruitment fees can be a deterrent. These fees, typically a percentage of the new hire's salary, can quickly add up, particularly when multiple positions need to be filled.

In an effort to cut costs and retain greater control over the hiring process, some companies opt to handle recruitment in-house. After all, with the plethora of online job boards, social media platforms, and recruitment tools available, it's easier than ever to advertise vacancies, sift through applications, and conduct interviews without the assistance of external recruiters.

However, while the allure of saving money may be appealing, it's essential to consider the trade-offs. Handling recruitment internally means dedicating valuable time and resources to the process – time that could be spent on core business activities. Moreover, without the expertise and networks of professional recruiters, there's a higher risk of making costly hiring mistakes, as our example with Alex demonstrates. In this example (which is scarily close to real-life scenarios we’ve seen time and time again), the decision to tackle recruitment internally may have seemed like a prudent financial choice at the time. But as we've seen, the cost of a bad hire can far outweigh the savings gained from avoiding recruitment fees.

Back to our gallant tech-start up.

Now, let’s jump back to our start up, rewind time for them and explore a scenario where they decided to enlist the expertise of a recruitment agency for the hire:

Sarah's team sprang into action, crafting personal outreach to these candidates; launching multi-channel campaigns and targeted adverts within niche industry platforms to active and passive candidates not on the open market. They left no stone unturned in their quest to reach out to the best and brightest talent.

As talent added up, Sarah and her team meticulously screened each one with personal qualifying stages, where they could check skills and experience, as well as the cultural fit that Tech Innovations were looking for. They conducted video and phone assessments, had honest (and sometimes difficult) conversations to understand motivations, alternative opportunities, until they presented only the most promising candidates to the hiring managers.

Tech Innovations were impressed with the quality of candidates Sarah presented, and the interview process proceeded smoothly. With Sarah's guidance, they were able to identify the perfect candidate – let's call him Tom – whose skills, experience, and personality aligned seamlessly with the company's needs.

But Sarah's involvement didn't end there. She facilitated negotiations between Tech Innovations and Tom, ensuring that both parties were satisfied with the terms of employment. And when it came time for Tom to join the team, Sarah was there every step of the way, providing support and ensuring a smooth transition into his new role.

Fast forward a few months, and Tom has become an invaluable asset to Tech Innovations, contributing fresh ideas, driving sales, innovation, and elevating team performance. The decision to enlist the help of a recruitment agency like Sarah's has more than paid off, delivering a seamless hiring experience and a top-tier employee who is making a tangible impact on the company's success.

And crunching the numbers in comparison, using the same annual salary of £45,000, means that Tech Innovations would pay a recruitment fee of just £9000 (20% terms) – a saving of £9,330, which means this side of the coin cost our company over 50% less of their budget, what a half price bargain! And the cherry on the top? There was no upfront cost or risk – just a gargantuan reduction in time and resources spent, which meant they could get back to business. It really was the start of something beautiful for Tech Innovations, as the clouds parted and they finally appreciated the value in outsourcing recruitment.