• A rockstar CV filled with bells and whistles of achievements and accolades… Tick
  • Reasonable salary expectations that are fitting into the constrained budget… Tick
  • Glowing references and recommendation letters…Tick
  • Experience perfectly aligned with the job… Tick
  • Hit it out of the park during both interviews… Tick

…Six weeks later….”Why did I hire this person”?

Sound familiar?

You have considered using psychometric assessments but usually reach the same conclusions; It’s too costly, assessments are for big corporates or its going to hold up the recruitment process or put my applicant off.

The true cost of a bad hire far outweighs the cost of an holistic psychometric and competency-based assessment.

Assessing a junior hire could cost between R500- R3500, a more tenured candidate between R3500-R9500. If you assume a headcount of 50 people with a standard 10% staff turnover (if you hire correctly), assessing 3 juniors and 2 senior candidates is around R25,000. This seems steep.

Now calculate the cost of the bad hire. Firstly, calculate quantifiable expenses such as recruitment, advertising, onboarding, orientation and training costs. Keep in mind the hidden cost of productivity losses from escalating staff turnover, due to either the wrong hire leaving (if you are lucky), or others jumping ship because of the toxicity caused by your new hire’s behaviour.

Secondly, compute the real cost of an open vacancy now that a replacement needs to be found. The actual costs of unfilled jobs profoundly impact on profit and loss figures, reducing the overall return on investment (ROI) significantly, to the detriment of an SME’s longevity and financial stability. A lengthy time-to-fill rate for whatever reason is the slow poison eating away at productivity and performance levels often occurring completely unnoticed until it’s too late.

The simple formula below (credit to CareerBuilder) indicates the financial losses incurred with each day a position remains vacant.

(Total Company Annual Revenue) ÷ (Number of Employees) ÷ 365 = Daily Lost Revenue

  • According to a benchmark study by the US Department of Labor, incorrect hires are costing companies on average 30% of the candidate’s first-year salary.
  • With this in mind, an incorrect hire earning a salary of 250k per annum will zap up an additional 80k from that constrained budget of yours.
  • This is more than 15x the amount of a robust psychometric assessment

There is a valid underlying rationalisation for assessing potential team members before appointing them in your SME.

Underperforming or mismatched employees can easily hide in larger corporates, but the impact of bad hires is almost exponential in SME’s. Assessment expenses do not have to break the bank, and their output value to the business will be positively felt on various levels.

Investing precious resources in the wrong person can be a financial death trap to the entire business. Notwithstanding the effect of a “bad apple” appointment on morale, engagement, productivity and culture that is much trickier to enumerate.