The True Cost of Poor Hiring Decisions

Let’s take a closer look at how poor hiring decisions impact businesses by examining Sam’s situation.

Sam is a manager at a pharmaceutical company where he has worked for nine years. With a degree in chemistry and a strong reputation for scientific expertise, he has successfully advanced through various roles and now leads a team of six. Recently, Sam expanded his team. After interviewing five candidates, he selected a person he had a good connection with and who he believed would be a strong fit for the role.

However, within a few months, the new hire was struggling to meet key objectives. Project deadlines were being missed, and Sam found himself spending a significant amount of time managing the underperforming employee rather than focusing on his own responsibilities. As the working relationship became strained, the new recruit eventually took a week off due to stress, further delaying projects and causing backlogs that affected the entire team’s performance.

Sam’s situation is not unique. Many managers experience similar challenges when a poor hiring decision disrupts workflow and negatively impacts team dynamics.

Studies indicate that up to 80% of employee turnover can be traced back to hiring mistakes. This aligns with the statistic that only 1 in 3 recruitment decisions result in a successful match. Employees who do not fit the role or organisation often become disengaged and leave quickly—28% of new hires quit within their first 90 days.

Recruiting, onboarding, and training a replacement is costly and time-consuming, putting further strain on the company’s resources.

Poor hiring decisions don’t just affect the individuals who struggle in their roles. They have a ripple effect on the entire team:

• Employees who are a poor fit often struggle to perform from the start. 
• 56% of unsuitable hires show immediate issues with attendance, leading to absenteeism. 
• As they fail to meet their objectives, they become disengaged, lowering overall team morale. 
• 60% of bad hires negatively impact their co-workers, as team members must take on additional work, leading to stress and burnout.

For managers, the burden is even greater. It is estimated that managers spend 17% of their time managing underperforming employees instead of focusing on strategic priorities. As seen in Sam’s case, this diverts attention from high-value tasks and creates frustration for both the manager and the team.

The financial impact of poor hiring decisions is staggering. Research by Gallup estimates that disengaged employees cost U.S. businesses $450 billion to $550 billion in lost productivity annually. 

However, there’s a silver lining: even marginal improvements in hiring accuracy can yield significant gains. A 2023 study by Moon and colleagues found that small improvements in hiring accuracy in a consumer electronics company led to an estimated $928 million in increased productivity.

To increase the success rate of hiring decisions, businesses must adopt the following best practices:

Ensuring that job descriptions are clear and well-defined allows organisations to attract the right candidates and set realistic expectations from the outset. 

Casting a wider net when recruiting ensures access to a variety of skilled candidates, increasing the likelihood of finding the best fit for the role.

Implementing structured assessments, including skill-based tests and behavioural interviews, helps organisations make data-driven hiring decisions rather than relying on intuition.

Providing training to hiring managers and recruiters ensures they have the knowledge and tools needed to make informed, fair, and effective hiring decisions.

Small improvements in hiring practices can make a big difference. By clearly defining job requirements, attracting diverse candidates, using rigorous assessments, and investing in recruitment training, businesses can shift the balance toward more successful hiring decisions.

The Kandola+ Inclusive Recruitment programme equips those responsible for hiring with the key skills necessary to make well-informed decisions. Through this programme, recruiters receive:

• In-depth feedback on their strengths and areas for growth.
• Opportunities to practise assessing candidates.
• Feedback on their hiring decisions to refine and improve their approach.

Ultimately, trained and skills recruiters who make good selection decisions leads to stronger teams, higher productivity, and long-term organisational success.