October 26th, 2016 | Sterling

The Risks of a Bad Hiring Decision

We all know that the hiring process is just that….a process. From recruiting to onboarding a new candidate, there are many things to keep in mind when hiring new personnel. Before you make a contract with a new employee, it is important to consider the consequences of a bad hire. Finding the perfect candidate can be like finding a needle in a haystack, so for lots of employers, it’s tempting to hire these people right away without going through some due diligence or background checks on the applicants. What if these candidates turn out to be different from what you originally thought during the interview? Many studies have found that not everyone is truthful on their CVs or job applications. According to survey reported by OnRec.com, 28.6 percent of UK job hunters lied on their CV with over 9.2% saying the lie was significant. What is even more stunning is that 75% of those surveyed believe that it’s the company’s responsibility to uncover lies during the interview process as opposed to the candidate being honest during the interview process.

Risks of a Bad Hire

The impact of one bad hire can spread through the entire company and leave behind harmful consequences to the company’s reputation, employee morale and even financial assets. Robert Half surveyed CFOs about what they thought were the biggest impacts of having a bad hire and found that 39% stated bad hiring decisions led to lower staff morale, followed by lost productivity at 34% and monetary cost at 25%.

There are many risks associated with poor hiring decisions. Our “How to Avoid a Bad Hire” white paper explores these risks and what you can do to prevent them from happening. Some of these risks include:

• Financial: The financial implications of a bad hire can be endless. Costs are accrued from the time of recruitment through onboarding. If a new hire doesn’t work out, they will need to be replaced, which then adds time and money back into recruiting, hiring and training their replacement. There could be also behaviors and actions that financially impact a business directly including fraud, bullying, violent behavior and reduced productivity.
• Workplace Fraud: Corporate fraud in the UK is a concerning issue. In a 2016 Price Waterhouse report, 55% of UK companies reported an incident of corporate fraud with internal representatives being the perpetrators in 46% of the reported cases. The internal fraud issues have cost UK companies billions of pounds every year. These incidents have the most impact on employee morale, brand strength and the company’s reputation.
• Brand and Reputation: Bad hiring decisions can affect a company’s brand and reputation. A company with a tarnished brand could find a harder time recruiting and attracting new candidates. For smaller companies, it could be devastating to trying to get investors and partners.
• Employee Morale and Corporate Culture: As shown above, one of the biggest impacts of bad hiring decision is on employee morale. The bad hire causes a ripple throughout the organization causing stress and unhappiness amongst the good employees, which could lead to dissatisfaction and high turnover rates.

How to Make Good Hiring Decisions

Diligent background checks is the first line of defense against poor hiring decisions. Employee screening checks can range from a basic criminal records check to a more thorough investigation including reference interviews, credit inquiries, employment verification, education and certification reviews and in casing involving driving vehicles, DVLA reports. However, it is important to find the balance in the need for a comprehensive background check with the cost and your candidate’s history. A background check should only investigate the aspects of the candidate’s past that are relevant to the position.

Implementing a good background check policy for your company is vital to helping you make the right hiring decisions. The policy should outline the objectives, process and types of background checks for each position and how the results of the tests will affect hiring decisions. Consult with your legal counsel to ensure your organisation is compliant with local regulatory guidelines. Choosing the right third party background check company is important to getting the information that you need about your candidates in an accurate and efficient manner.

Don’t let bad hiring decisions negatively affect your business. Find out more tips and information about the risks of a bad hire and how to avoid them by downloading our white paper.

This publication is for informational purposes only and nothing contained in it should be construed as legal advice. We expressly disclaim any warranty or responsibility for damages arising out this information. We encourage you to consult with legal counsel regarding your specific needs. We do not undertake any duty to update previously posted materials.