The costs of a mishire: how good assessments help prevent a bad hire

In today's job market, the costs of hiring the wrong person, also known as a "mishire," are substantial. Companies that select the wrong candidate face not only financial consequences but also negative effects on work culture, productivity, and team well-being. A well-thought-out selection process, in which reliable assessments play a crucial role, can significantly reduce this risk. In this blog, we discuss the hidden and visible costs of a mishire and explain how validated assessments in selection and recruitment processes can help attract the right talents.

What are the actual costs of a mishire?

When a company hires the wrong person, the financial impact is often the primary concern. Research shows that a mishire costs an organization an average of 30% of the employee's annual salary. For an employee with a salary of €40,000 per year, this means a direct cost of €12,000. For higher salaries, such as a senior or management position with an annual salary of €100,000, costs can rise to €30,000 or more. But the costs of a bad hire are not limited to money; they also affect the efficiency, morale, and reputation of the company.

1. Direct financial costs

The first and most obvious costs of a mishire are direct financial expenses. The costs of the recruitment process itself, such as advertising, recruitment agencies, and internal time investment, can range from €5,000 to €10,000 per vacancy. When you add the costs of onboarding and training the wrong employee, these costs can increase by €4,000 to €7,000. A mishire can therefore quickly cost the company €10,000 to €17,000 in direct expenses, not including productivity losses and the negative impact on the team.

2. Productivity loss

In addition to direct financial costs, a mishire often leads to productivity loss. Research shows that a new employee needs an average of two to six months to become fully productive. If it turns out that the new employee does not meet the job requirements, this means the company has endured months of losses. On average, productivity losses of 10% to 20% are measured in the team, which can amount to €10,000 to €20,000 per year, depending on salary costs and the team’s contribution to revenue.

3. Impact on team dynamics and work culture

A bad hire can lead to tensions and conflicts within the team, which not only creates a negative work environment but also lowers the motivation and satisfaction of other team members. Studies show that a poor work culture can increase the likelihood of other employees leaving by 45%. If a team member with an average salary of €50,000 leaves as a result, the cost of replacing this team member can amount to €15,000 (30% of the annual salary), excluding the loss of knowledge and experience.

4. Negative customer experience

When a new employee underperforms, it can also impact the company's customers. Poor service or communication errors lead to dissatisfied customers and, ultimately, customer loss. Losing a single customer can cost a company thousands of euros.

5. Damage to the company's reputation

Mishires who leave shortly after their appointment can damage the company’s reputation in the job market, especially in an era where employer reviews are shared publicly on platforms like Glassdoor and Indeed. Reputation damage can increase recruitment costs by an average of 20%, as the company may struggle to attract top talent. With a recruitment budget of €50,000 per year, this can result in an increase of €10,000 in recruitment costs.

How can reliable assessments help prevent mishires?

With the right selection and assessment tools, companies can significantly reduce the risk of a bad hire. Reliable assessments, such as personality profiles, cognitive assessments, and skills tests, offer valuable insights beyond the traditional interview process. Using these tools strategically can greatly increase the chances of a good match between the candidate and the position.

1. Personality assessments for cultural fit

The importance of cultural fit cannot be underestimated: employees who do not fit well within the company culture are 32% more likely to leave within the first year. Personality assessments, such as Everything DiSC, provide employers with insights into candidates' behavioral styles, helping them find the right cultural match. Reducing turnover in the first year can reduce the costs of new hires by an average of €5,000 to €10,000 per person.

2. Cognitive ability tests to ensure competence

Cognitive ability tests provide a strong indication of a candidate's ability to learn and perform. Employees who score high on these tests are often more resilient to work pressure and show higher productivity. Improving job performance through cognitive tests can bring the company an annual €10,000 to €15,000 productivity gain per new employee, as the right candidate becomes productive faster.

3. Motivation and drive analysis for long-term success

Employees who are motivated and have a clear drive tend to stay longer and perform better. By specifically selecting for motivation and drive with assessments, a company can reduce turnover by 20%. With an average replacement cost of €15,000 to €20,000 per departing employee, reducing turnover in a team of ten can quickly save €30,000 to €40,000 per year.

4. Integrity tests to determine reliability

Integrity tests can help increase reliability when selecting employees for critical functions. Research shows that using integrity tests can reduce the likelihood of unethical behavior by 30%. This proactive approach can save a company thousands of euros in legal and operational costs resulting from misconduct.

5. 360-degree feedback for objective evaluation

360-degree feedback assessments are effective in uncovering how a candidate performs in various work relationships. By identifying potential pitfalls early on, an organization can make timely adjustments and avoid unnecessary costs. This approach can save an average of €5,000 per candidate who is hired by a better-informed team.

Reduce costs and increase quality with good selection

The costs of a mishire are too high to ignore and can quickly amount to thousands of euros per candidate. By strategically using validated and reliable assessments, companies can improve the quality of their hiring process and reduce the chances of a bad hire. Assessments such as personality profiles, cognitive assessments, and integrity tests provide employers with the necessary insights to assess whether a candidate is a good fit for both the role and company culture.

In a competitive job market, it is essential to focus not only on skills and experience but also on candidates' personality, motivation, and integrity. Reliable assessments help companies avoid the costs of a bad hire and ensure a sustainable and motivated team, contributing to the success of the company.