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The Cost of a Mis-Hire

Many people have heard that the cost of choosing the wrong candidate is very expensive, but often it's easy to look past how to quantify the number for your own business. And can the average $30,000-$40,000 cost of mis-hire apply to your design company? Let's break it down and put real numbers behind the suspicion.


Cost Breakdown:

1. Crafting your position details takes some time for strategy. Once you create a template for each role, then you start to have more time on your hands. But until then, you need to consider the compensation, benefits, and responsibilities for each person. If it takes you 1-2 hours to craft, you're looking at $100 worth of your time.


2. Crafting Ad can be done by you or another associate on the marketing time, but plan for an hour of time to create 3 job ads to rotate and get enough traction.


3. Job Ads can range, and the trick is to stay on top of them so they don't consume your budget. If you are using the "hire slow / fire fast" method, company's can experience upwards of $3,000 in hire ads to find 1-2 candidates per quarter. Then the time it takes to actually post the job ads should be done on a rotating basis to get the best results, but can be delegated to a team member, as it's closer to an entry level tasks requiring data entry, averaging a couple of hours, or $50 of time.


4. While interviewing can be done by anyone in the organization, it should fall on the owner or department manager to make final decisions on who comes into the company to be sure your culture is upheld. For every 1 candidate you want to in-person interview, (and it takes at least 3 to hire 1 person), you should be conducting between 12-15 phone interviews. On average, 25 hours of interviewing is quantified by multiplying the persons salaries that are interviewing. If on average the combined interview's salaries average $40/hour x 25 = $1,000


5. Reference and background checks also are a good practice when choosing your candidate with confidence. Once you've narrowed your candidate selection to a few people, you can conduct the background and reference check on them. Including the cost of the background check per candidate and time quantified by salaries, $250 would round out the costs of that extra critical double check.


Which means you've already spent $4,500 in time and investment to find 1 person. What could you do with an extra $4,500 or 35 hours of time?

6. Once the person is hired, there is time to prep before their start date. But let's just wrap that into training time. In the first 30 days of a new employee, for the best ramp up it's recommend to fill their calendars with training for the first 4 weeks. That's 160 hours of time to fill with you, your team, and the new hire. 160 hours x $40 (average of all employees salaries involved) can up to $20,000 and more.


7. Most new hires require tools to get up and running quickly in their role. Those tools verify by position, but consider any technology that would be required to be purchased, sample books, or other software that will help them do their job. These tools can add up to over $5,000!


8. The last factor that is not often considered is loss of production due to errors and the learning curve. For a Designer that's leads that went unsold that could have been closed by a more seasoned designer. For project managers and installers, it could be accidental errors when processing the paperwork and ordering product, or damaging the product when it is received / installed. Whether it's $450, the cost per lead, or $500, a reorder cost on 1 item, them more those mistakes occur in the first 90 days, the longer you will see an ROI from hiring them.


If you think that $30,000 is too much to make a mistake on your recruiting or training process, schedule a Discovery Call today to talk about your next hiring role and see how we can help you build your dream team.


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