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5 reasons why bad hires are so costly to startups


When it comes to staffing your startup, the price is high. In fact, your hiring decisions are vital to the success and upward trajectory of your startup.

In this article, we look at five reasons why bad hires are so costly to startups. From the actual cost, to your time, your reputation, lost opportunities, and the culture impact, you can't afford to mis-hire.

#1: The cost

The straight up costs with putting your job on job boards, culling through applications, interviewing candidates, calling references, searching candidate's social media pages, and then deciding who to hire costs a lot for your startup.

In addition, you have to account for your time, that of anyone who helps you, a recruiter if you use one, job posting fees, and then when you have to do it all over again because you made a bad hire, you incur these costs all over again.

This is the overarching reason that it's so important to hire well the first time. You can't afford to hire wrong. 

#2: The time

You probably find time at a premium. Most days are spent running from one task to the next.

Then, you throw in the hiring process. According to one report, the average hiring process takes nearly 23 days to complete. Not only does this take a lot of time, but so does the on-boarding process. This can take up to a year, depending on the position.

All of this works together to cost you a lot of time and money. 

#3: Your reputation

If you make a bad hire, the repercussions could be widespread. Just imagine if you hire a customer service rep who doesn't really care about your customers. They could cause you many problems.

Ultimately word spreads because your customers have negative experiences. Then, your reputation suffers, and your startup has major problems.

When your reputation suffers, whether by word of mouth or online, your business suffers. It may be hard to find more funding. You may lose customers.

Bad hires can cost you your startup. 

#4: The lost opportunity

The opportunity cost by definition is the loss of potential gain from other alternatives when one alternative is chosen.

So, while hiring poorly costs you money, time, and your reputation, it's the missed opportunity cost that may hit you the hardest.

When making a bad hire, you lose out on the good hire you could have made. What's more, since it takes nearly a year for a new employee to be well-versed and highly productive for your company, that's a year of missed opportunity.

Just imagine how many tasks they leave undone, and how much dissent they can sow. This all may even happen before you realize you hired badly. 

#5: The cultural impact

One of the most important reasons bad hires are bad for business has to do with your company's culture and the overall morale in your startup.

As a startup, you are uniquely poised to create a company culture from the onset of your business. You have probably thought a lot about this and worked hard to create a culture that's good for business and your team.

You may have even hired several top quality team members who work hard, believe in your mission, and are part of your work family. What happens when you hire poorly?

Almost immediately there is a huge drop in employee morale and productivity, and your company culture suffers. Your best employees feel the bad hire most acutely because their work is affected. They have to work harder to make up for your bad hire.

In the end this costs you big time because the productivity and morale of all your employees suffers. You might also lose them as they don't want to work with the bad apples. 

Final thoughts

Bad hires are costly to your startup, so the best thing you can do is hire better. Just eliminating one bad hire each year can save you tens of thousands of dollars and many headaches.

Imagine what eliminating all of your bad hires could do?

Take care of your startup by working the hiring process in a systematic, well thought out manner. Involve others in the interview process. Have a human resources team on hand to help you with on-boarding.

The investment you make in your employees is a hefty one, and one that pays you back in multiple ways if you do it right every time. 

Are you a new startup ready to succeed? Are you looking to get your new business off the ground and watch it rise to success? We are here for you. We can help answer your questions and guide you through the process. Outsource your HR duties, finances, payroll and more to us. Contact Escalon today to get started.

Image: Olivier Collet on Unsplash 

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