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The Cost of a Bad Hire and Reducing the Odds of Making One

Written by Michelle Silverstein

It’s well known that hiring a bad employee can be incredibly costly. Estimates of the true cost of a bad hire vary widely depending on the type of position and amount of experience required. One estimate from the US Department of Labor places the average cost of a bad hiring decision at about 30% of the employee’s first-year salary. In another study conducted by CareerBuilder, 69% of companies surveyed were negatively impacted by a bad hire, and nearly a quarter of those employers stated that a bad hire cost them over $50,000.

Bad hires are costly in a lot of different ways, some of them less tangible than others. While the costs associated with hiring and training a new employee are obvious, bad hires can also have a negative impact on employee morale and overall productivity. As a (relatively) small business ourselves, whose customer base is made up of a lot of small and medium-sized businesses, it’s our position that the risks of a bad hire can be more dramatic for smaller companies. Smaller companies have significantly less bandwidth to put towards covering the duties of the vacant position and recruiting a replacement, and an unproductive or--even worse--a toxic hire can have a bigger impact on a small group than he/she will have on a larger organization.

Because of these costs, companies often strive to reduce the risk of hiring the wrong person as much as possible. There are a lot of reasons why a company might hire the wrong person, but 21% of the employers in a CareerBuilder survey attributed their bad hires to a failure to sufficiently assess employee skills in the pre-hire process. Employees who lack the necessary skills or abilities for the job will underperform, ultimately leading to involuntary turnover.

Testing your candidates in the pre-hire process is one of the best ways to minimize the risks posed by a potential bad hire. Resumes and interviews can only reveal so much information – one survey found that 56% of hiring managers have caught job candidates lying on their resumes, most of whom were embellishing their stated abilities. Administering pre-employment tests for vital job-related abilities is one of the few objective ways to accurately assess your candidate’s potential to fulfill the responsibilities of the job.

Despite the claims of some testing vendors, pre-employment tests can’t magically erase the chance of making another bad hire. We cringe, and potential customers should too, when we see testing providers make claims that their tests will prevent you from ever making a bad hire again. There are many things that tests cannot measure, and the best pre-employment tests arm hiring managers with predictive data that helps them make informed hiring decisions. Incorporating professionally developed pre-employment tests into your employee selection process is about reducing your hiring risk, not eliminating it.



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