The Lingering Cost of Making a Bad Hire

If you have been managing and hiring people for a while it is likely that along the way you have made a bad hire. By bad hire we mean a new hire that doesn’t fit in with your culture, is disruptive to your team, is not able to perform at an adequate level, etc. Once you have made this mistake the question becomes ‘what do you do now?’

Fundamentally, you have only a few options:

  • Ignore the problem and hope it will work itself out (I strongly suggest you never do this one)
  • ‘Cut bait’ now, terminate the person and curb your losses,
  • Focus on managing the person’s performance to see if you can get them on the right track.

In trying to decide the most effective course of action you should consider these factors.

Bad attitude

If one of the issues that is causing a problem is the person has a ‘bad attitude’ meaning they are disruptive, constantly challenging everything and everyone, always complaining about something, acting belligerent and are negatively impacted other employees then you must take immediate action. If you delay taking action the person can become a cancer to your team and disrupt its performance by becoming an irritant, a distraction and causing dysfunctional behavior.

You must also understand that the other team members are watching to see what you are going to do to handle this situation which has the potential to undermine your leadership of the team, if not handled well.

Depending on the situation you have several choices. Speak with the employee to let them know what you are observing and how their behavior is disruptive. Be prepared to be specific because based on their behavior they are not likely to agree with your assessment and will challenge your assertion. Do not be deterred by their resistance and put them on notice that you are implementing a performance improvement plan which will give them the opportunity to turn the situation around. While being firm you should also be caring and let them know they have your support and you will work with them for a positive outcome.

Your other option, if you have seen enough to be able to definitively determine that the person is not going to make it then you need to speak with Human Resources to determine the right course of action based on your company’s policies and procedures and to receive coaching in properly handling the situation.

Poor Performance

If you have clear goals and key performance indicators that the person is not achieving, then this should form the basis for a performance improvement discussion. Don’t jump the gun and go straight to putting the person in a performance improvement plan. Talk to him or her to find out what is going on and listen to their side of the story. There may be extenuating circumstances going on that is impacting their performance that you are not aware of. Please note that by extenuating circumstances, I am not talking about a litany of excuses, but potentially real issues that legitimately could be impacting their performance.

For example, you may find out that the employee’s 8 year old son is fighting for his life with a serious disease and the employee acknowledges he has been distracted and not really present because of the situation. Knowing this information doesn’t change the need for the employee to perform the job, however, it does open the door to finding ways to help the employee with managing the situation. Would working from home be an effective accommodation that would allow them much more flexibility in how they perform their work and how they are able to attend to the medical needs of their son as well? Or would changing shifts make things easier? This is where having an open honest and caring dialogue with the employee will likely identify some viable options.

In the situation I identify above, it will be important to loop HR into the conversation and your Employee Assistance Program, if you have one.

Negatively Impacting The functioning of the Team

One of the clear issues that a dysfunctional employee can cause is to disrupt an otherwise well performing team. Once you start to understand that the employee is a disrupting factor you need to act fast to address the situation.  Keep in mind that your success is dependent on your team successfully performing their jobs, so a disruptive employee is putting your job on the line as well. Sound harsh? When your boss calls you in and says she has noticed that the numbers in your department are falling below there normal level you will understand that dealing with a disruptive employee is an issue bigger than just an employee issue. Deal with it now or feel the ripple effect of its consequences.

Another impact that a bad hire can have on your team is to cause turnover because people do not want to work with the person. You must act swiftly to keep the bad apple from souring your team and causing you to lose good people.

Training Cost

It is likely you have a training budget for your department; however, I doubt that you budgeted for remedial training as part of it. Assessing the developmental needs of your new hire is important and you will have to decide whether you have the budget and time needed to get this person up to level where they can perform satisfactorily.

If the answer is yes to the above, then you obviously put a development plan in place to assist the employee. If do you not have the time nor the money to invest in this employee, then you either need to work with HR to find the person another job in the company that their skill level and competency fit with or you are faced with terminating them.

Customer Satisfaction

Up to this point, I talked about the internal impacts of a bad hire. The other impact, especially for customer facing employees is the potential impact on customer satisfaction. You cannot afford to let a poor performing employee negatively impact customer satisfaction for any sustained amount of time or you will start to lose sales and customers.

Learning From Your Mistake

As is true with any mistake one of the most important factors is that you learn from it. First and foremost, you must accept that making a bad hire was your mistake. Carefully analyze what led you to hire this person and where did you miss read or not see the indicators that the person was not the right candidate.

  • Were you rushing to hire?
  • Were your selection criteria the right criteria?
  • Were you bamboozled by the applicant’s charm?
  • Did you thoroughly evaluate the persons’ soft and technical skills?
  • Were the selection tools you used effective? The right ones?

These are just some of the self-evaluation questions you need to ask yourself. The key point here is you must get to the bottom of or root cause for you making the mistake because that is when true learning can occur. And, be forewarned that you should be really tough on yourself because this is the gateway to not repeating the mistake. For example, if you come to the conclusion that the applicant lied about their qualifications and decide this is why you made the mistake. Wrong, wrong, wrong! The real mistake is that you did not know how or apply selection tools to correctly identity the candidate’s qualifications.

  • Did you conduct a simple online background check to save some money?
  • Did you thoroughly check at least three references that have direct knowledge about the candidates performance with a well thought out set of questions based on determining past performance and competencies?
  • Did you conduct assessments to evaluate the applicant’s emotional intelligence, psychological and behavioral profile?

Determining if a candidate has the right qualifications is your job so don’t short cut the process.

In the end, don’t beat yourself up too much because we have all been there. The key is that you learn from this mistake and put what you learn into practice the next time you hire someone.

The Financial Cost of a Bad Hire

In addition to the above factors which are generally associated with soft cost (meaning they don’t show up in a financial line item) there are also hard cost that are associated with making a bad hire.

The cost and consequences of making a bad hire can vary dramatically depending on the situation, but there is one thing you can be certain of is that it is expensive. While replacing a high-level executive can be over twice their annual salary the nationwide average for most jobs hovers at around 20% of their annual salary, meaning that you can expect each bad hiring decision to eat thousands of dollars out of your budget.

In his article ‘Cost of Bad Hire,’ Adam Uzialko wrote that “the average cost of a bad hire is $17,000, according to 2016 research by CareerBuilder. However, depending on the role and the company, this figure can go as high as $240,000, per 2021 research from the U.S. Department of Labor.”


Bad hires are a reality. They happen. The key is for organizations and their managers to learn from the mistake of making a bad hire because it has real consequences that include both hard and soft cost. Implementing a well thought out selection process that includes clear criteria for selection, using proven tools to assess those identified qualifications and requirements, and creating a means for managers to continuously improve their hiring skills are all essential to making good hires.

On a closing note, does your organization have a ‘How to Effectively Make Good Hires and Avoid Making Bad Hires’ course for all parties involved in the hiring process? It might just be worth the investment given the high cost to the organization of making bad hires.