How To Avoid Costly Hiring Mistakes

According to an employer survey by, a global leader in human capital solutions, 4 in 10 companies say a bad hire has cost them at least $25,000; 25% report a bad hire has cost them $50,000 or more.

Where does the money go? Bad hires financially drain a business by:

  • Negatively affecting its productivity;
  • Requiring time to recruit/train a replacement;
  • Depressing employee morale;
  • Undermining client relations;
  • Lowering sales; and
  • Incurring legal expenses.

To avoid such losses, a business first needs to be prepared to invest in an ideal candidate. The CareerBuilder 2013 U.S. Job Forecast reports a growing number of employers (47% in 2013 vs. 32% in 2012) are willing to offer higher starting salaries for new employees – on average a 3% bump in the amount of the initial job offer. The goal is to attract and retain top talent, therefore avoiding the larger losses that less qualified candidates ultimately might incur.

Second, a business needs to take time to decide which candidates are worth investment. Business on Main, an online community for small-business leaders, hosts an article by entrepreneurial expert Susan Schreter entitled “How to Hire the Right Employees for Your Startup.” She suggests that entrepreneurs make poor hiring choices because they compromise in a rush to fill a position. She outlines five considerations for better decision-making.

  • Hire desired skills rather than “fast learners”
  • Hire relevant experience in terms of achievements, rather than years experience
  • Hire competitive drive
  • Hire persistence
  • Test performance (e.g. have a candidate first complete a project as an independent contractor)

Finally, companies need to take time to check references. One in 10 of the employers in the CareerBuilder survey that lost money on a bad hire had skipped a reference check. It’s important to verify that the qualifications and achievements listed on a resume are accurate. Asking the right questions of a reference will reveal whether a candidate has been completely honest. Digital recruiter gives examples of questions that probe for specifics, such as:

  • “How are you acquainted with the candidate?”
  • “How long did you and the candidate work together?”
  • “If you were hiring people, would you hire the candidate and, if so, for what type of position?”

To learn more about how to avoid costly hiring mistakes, read’s post “The Best Questions a Reference Checker Can Ask.”

I hope you and/or your colleagues find this newsletter helpful. As you know, our expertise lies in helping growing companies solve their working capital challenges. Please call or email me if you’d like to discuss a client or prospect in need of working capital. 


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