4 Painful (and Avoidable) Costs of Making a “Bad” Hire

By Jonathan Moerbe, CEO and Master Coach, Rialto Academy

4 Costs of a Bad Hire

Recently, I was debriefing with a coaching client about a “bad hire” she made. Rebecca is a mega real estate agent who recently joined our program, and she was understandably frustrated.

“I spent weeks interviewing people to be my assistant,” she explained. “I took time away from building my business, and when I chose Stephen, I really thought he was the one who’d help take my business to the next level. Now he’s gone, and I’m back to where I started.”

I didn’t have the heart to tell her in that moment that she was actually worse off than where she started, because making a bad hire can have some unexpected spillover effects. To prepare for our follow-up meeting, I decided to brainstorm all the costs of bad hires. I’ll share them here so others can benefit from this lesson!

I didn’t have the heart to tell her in that moment that she was actually worse off than where she started,
because making a bad hire can have some unexpected spillover effects.

What constitutes a “bad” hire?

Every business is founded to solve some essential problem, thus creating value for other people and earning the right to be paid for creating that value. Finding the right talent can lead you to a superhighway of growth—and the wrong hire can lead you into a cul-de-sac that’s difficult to escape.

Essentially, a bad hire is selecting a new team member who doesn’t advance your organization’s central mission.

An important takeaway with a “bad hire” is that we have to stop and investigate what happened. What made it a bad hire? What ownership do we have for the negative results of this hire?

Alignment matters!

We generally hire someone hoping for—and assuming—the best. What makes someone a bad hire is usually related to a lack of alignment, and that can manifest in all different kinds of ways:

  • Lack of personality alignment
  • Lack of cultural alignment
  • Lack of fit with a specific role
  • Lack of performance according to a standard

Note the first three things should be things we are able to eliminate during a good hiring process. That’s why it’s so dangerous to move too quickly, skip steps, hire out of pain, or select based on feelings. We have to confirm that alignment before the person starts. There are many talented people who are not right for our organization or leadership style—or just aren’t fits right now. Timing and alignment matter!

So, to avoid a bad hire, we want to remove as much of the guesswork as possible and try to confirm alignment.

As I talked more with Rebecca, I was able to note a couple of issues related to alignment. She had hired someone she liked, who actually reminded her of herself.

However, the person who was going to be successful in an assistant role needed to be complementary to her, not redundant.

She had also overly relied on referrals from others, rather than her own process.

So, she ended up with a bad hire. I found it important to not blame Stephen too much in this process. Shifting the blame to him reduced the chance to learn the tough leadership lessons she needed to learn. After all, it’s always a leadership issue!

Four Unintended Costs of Making a Bad Hire

Together, Rebecca and I explored the costs of her bad hire at our next meeting so she could see the consequences of not following a strict hiring process based on best practices.

1. Direct costs:

The most basic costs are those she directly paid to hire her assistant: She paid some small costs to host the job posting and for personality assessments for multiple candidates. She also took the best candidates to coffee before selecting Stephen.

In addition, she had paid him a small signing bonus and, unfortunately for her bottom line, she paid for 11 weeks of salary and benefits while training him and trying to get up to speed. 

2. Restart costs:

She still needed an assistant, and had to start that process over, meaning she’d still need to find a person—and now with less confidence about getting that done.

3. Business costs:

Part of what had led to Stephen not working out was a lack of patience with clients. Rebecca’s real estate clientele tended to be fairly needy, and Stephen tended to rush conversations in the interest of getting to the result more quickly. He wasn’t overtly rude, but he didn’t handle clients with the care Rebecca always had. She was concerned about the work she’d need to do to repair the situation.

4. Opportunity costs:

Instead of finding a new assistant, Rebecca could have used this valuable time to work on the laundry list of new projects she still had in the wings—the things that Stephen was supposed to free her up to do. That didn’t even count the time she had spent preparing for Stephen. Her time was what she had been trying to save, and it’s what she most regretted losing.

Where does Rebecca go from here?

During our meeting, I wrote out all these costs, and included the potential loss of profits she faced compared to where she thought she’d be.

My purpose was not to make her feel worse than she already did. It was to demonstrate how important hiring correctly was. And it’s important to also remember that once you know you have the wrong person, it’s essential to act fast. Rebecca’s entire situation served as evidence for the importance of hiring slowly and firing quickly.

By hiring out of a plan instead of out of pain, Rebecca could reduce the likelihood of a bad hire, and by having a great system for tracking progress—or lack thereof—she’d equip herself to detect problems more quickly.

Thinking about getting a little help to take your real estate biz to the next level? Hiring an assistant can set you up for ongoing success—or be a source of constant frustration. In this new online course, you’ll learn how to time the hire, ask the right questions, and find the person who best complements you.

> Register for Make Your First Hire here.