Making the right hiring decision is crucial, but sometimes even the most seasoned recruiters can get it wrong. When a new hire doesn't work out, it's easy to think the solution is to quickly replace them and move on. But the real cost of a hiring mistake runs much deeper, both financially and culturally, than most companies realize. In fact, recent studies show that hiring missteps can cost organizations significantly — and not just in dollars.
One of the most visible consequences of a hiring mistake is the financial hit. A 2022 study by the Society for Human Resource Management (SHRM) found that the average cost per hire in the U.S. was $4,700, though other estimates place the figure closer to $15,000 when considering senior-level hires. The U.S. Labour Department actually puts the number higher at one third the new hire’s annual salary. Now imagine spending that kind of money only to realize the person wasn’t the right fit. It doesn’t stop there. The cost of rehiring if you make a mistake—advertising, recruiting, onboarding, and training—piles on as well, raising your initial figure. Plus, there's the potential loss of productivity while the position remains vacant.
But what many don't consider is the long-term impact on team morale. Replacing an employee can lower productivity for weeks or even months after the turnover. A 2023 Gallup report highlighted that disengagement spikes in teams when turnover occurs, as current employees may have to pick up additional work. This "ripple effect" of reduced engagement and increased burnout has serious costs that aren’t always tracked. Employees may work slower, deadlines can be missed with not enough hands to fulfill the project, engagement can take a dive, and other employees may decide it’s time for them to move on as well. If a bad hire and a quick fire triggers more turnover, that starting figure of $4,700 is going to grow much, much higher.
Read more: Take a deeper dive into this topic with our eBook “The Cost of a Bad Hire”
Let’s take a minute to unpack the morale and culture hit that comes with bad hires. Beyond the dollars and cents, a hiring mistake can ripple through the entire company culture. According to a study by the Harvard Business Review, 80% of employee turnover is related to poor hiring decisions. A bad hire can disrupt team dynamics, lower morale, and erode trust in management. If the bad hire is a manager, it can also impact the leadership and direction of a company along with the job satisfaction of employees.
Consider this: when a new employee doesn't meet expectations, existing team members may feel frustrated, undervalued, or overburdened. Over time, this could lead to higher levels of stress and resentment. Worse still, a poor hiring decision can lower team members' trust in the recruitment process and leadership's judgment. This kind of cultural damage can take months, if not years, to recover from, impacting ongoing retention and overall performance.
Bad hires not only affect internal operations but can also strain external relationships. One common truth in the business world is that high turnover impacts continuity which in turn can impact client relationships and retention. Clients can sense when a company is stretched thin, leading to missed deadlines, subpar service, or strained relationships. And when clients aren’t happy, they start looking for alternatives. In industries where switching costs are low, that can spell disaster. After all, the cost of replacing a dissatisfied client or customer can far exceed the initial financial loss tied to a bad hire. If a hiring mistake costs a key client, then you could be looking at thousands of dollars going down the drain because the wrong person made it through your recruitment process.
Recovery from a hiring mistake is not an overnight process. According to a 2022 CareerBuilder report, 75% of employers have made bad hires and in some cases, those mistakes took more than a year to recover from fully. A bad hire means lost time and effort—not just for the HR team but for every department involved. From training to orientation, to the team morale issues mentioned earlier, the recovery period can stretch out as companies try to regain their footing.
This is especially true if the bad hire is in the management level or above. The more senior the role, the greater the loss and higher the financial hit when it’s corrected. Think about moving a leader into place that drives their team or department in the wrong direction during their tenure. Once they are gone, the company still needs to course correct that mistake while dealing with all the rest of the implications of turnover. Not only will those teams be behind, it can be next to impossible to close the gap and catch up to where they would have been with a strong leader from the start.
Read more: Retain your best talent with these top 10 turnover tips
So, how can businesses avoid these costly hiring mistakes? One way is to rethink your hiring process from start to finish, ensuring that you’re not just looking for candidates who can do the job, but also for those who align with your company culture and prove to be a good team fit.
That’s where McQuaig comes in. By using tools such as personality assessments and cognitive ability tests, hiring managers can more accurately predict future success in a role. They can gain a better sense about who the candidate is, how they’ll work under pressure, what motivates them, and what their potential might be. By taking a more strategic, data-driven approach to hiring, companies can mitigate the risk of making costly errors.
At the end of the day, a hiring mistake doesn’t just affect the employee in question—it impacts the entire business. The higher up within the company hierarchy the bad hire occurs at, the greater the impact and longer the recovery time. With hiring costs rising and cultural implications growing, the importance of making thoughtful, informed decisions has never been greater. Investing time in creating a structured, evidence-based hiring process will not only save money in the long run but also foster a more engaged, productive workforce that will provide the company with stability.
In a world where talent can make or break an organization, hiring mistakes are something no business can afford.