Once your business starts adding employees, you add a new layer of complexity to your business. Moving from a one-person operation to a business owner with one or more workers is a huge step. Whether you haven’t yet hired your first employee or you’re thinking about growing an existing team, there are some things you should first consider.

Many business make the mistake of rushing into hiring someone merely to have someone to help. Unfortunately, the wrong choice can cost your business in a multitude of ways. Here are seven financial costs associated with hiring the wrong person. Realizing these may prompt you to be more careful while you’re hiring employees.

Lost Training Costs

One of the biggest costs associated with hiring the wrong employee is tied into training. Depending on your training process, this could be tens of thousands of dollars, especially if your training process involves travel or a formal classroom setting with a professional instructor. At the very least, either you or another worker will have to take time out of your busy schedule to train the new person. Even if new workers shadow you as you do your own work, explaining what you do takes time out of your schedule and distracts you from the attention you should be paying to your work.

If the employee stays with your organization once the training is complete, this time won’t be wasted. However, if you’ve chosen the wrong employee and this fact becomes apparent during or after training, you’ll have wasted time and expense on training someone who won’t be putting that information toward working for you. For this reason, the interview screening process is essential.

Reputation Harm

If an employee is the wrong fit, that fact may not escape the attention of your clients, customers, or the community at large. Often a poor fit is apparent to both sides right away and a less-than-professional employee may talk about it to everyone in town. You won’t even be aware of the information being spread about you until it’s repeated to you at a much later date. In the meantime, potential and current customers and employees may have been scared away by the rumors being spread about your business.

Your business is especially beneficial after you’ve made the decision to dismiss the employee. Even if you handle the split amicably, bitter feelings can linger. You may find that your job openings are difficult to fill once the word gets out. It doesn’t even matter if the information is true. You often won’t be given a chance to defend yourself against them.

Lost Customers

During the time your misfit employee is working for your business, he can do irreparable harm to your customer relations. Even your longtime customers may shy away from your company after dealing with your newest employee for a while. It may not even be that your worker was rude. Your customers may simply feel as though something is off about this new team member and decide to go with one of your competitors.

If you lose customers due to a bad hiring decision, it’s important to try to repair the situation once the employee is no longer with you. If possible, contact some of those customers and invite them back with a special discount. You don’t have to specifically mention the employee by name. Simply say that you or another trusted team member will be handling that customer’s account moving forward.

Missed Opportunities

When you snatch up the first candidate who applies because you’re in need of someone to help out with duties, you cost yourself time. During the months you waste hiring, training, and working with the mis-hire, your ideal candidate may be chosen by another organization, keeping that employee out of your reach for the foreseeable future.

By taking your time and carefully screening each potential employee, you won’t have to worry about wasting time on the wrong employee. While there is no person out there who is 100 percent perfect, there are people who are much more suited to your organization. You just have to interview as many candidates as possible instead of settling on one to cut the interview process short.

Morale Damage

If you have at least one employee already on staff, the wrong hire can hurt those employees. They may feel disgruntled that you brought in a new employee and forced them to spend time on training. They may feel as though they should have been given the duties the misfit was given. They may simply see the error as a sign that you are out of touch with the culture you’re trying to create.

Whatever the cause, if your poor hiring choices damage workplace morale, you may have extra work to do once the employee is gone. Have an open, honest conversation with your team members about the mistake and ask their opinions on how you can avoid making such a mistake in the future. They’ll feel honored to have been asked and you’ll get valuable feedback you can put to use in the future.

Recruiting Costs

This cost can be even higher if you paid a recruiter to locate the employee for you. Some employees come with guarantees that you’ll be able to work with the person they send you for at least a period of time. If you don’t have such a guarantee or the employee works beyond that time, you may lose the money you paid the recruiter.

If you didn’t use a recruiter, you likely spent time and perhaps a little money getting the word out about your job opening. You may have put the word out to colleagues or used job boards to make the announcement. You spent time sorting through resumes and interviewing candidates. When the employee doesn’t work out, you not only lose the time and money you spent finding that candidate, but you have to start the entire process over again to fill the now-vacant position.

Legal Costs

If the worst happens and your mistaken hire takes legal action against you, you’ll be forced to deal with legal costs and headaches related to that action. Even if the dismissed employee has no case, you’ll have months of drama, pulling you away from building your business. A lawsuit may also impact your reputation around town as a great employer and upstanding business owner.

Prior to notifying the employee about the termination, you may choose to get a legal consultation to avoid any legal issues. You’ll pay a fee for that consultation, as well as the time it takes to meet with the attorney at a remote location. If you have to draft any legal documentation to protect your organization against a lawsuit or respond to a legal notice, you’ll pay legal fees for that, as well.

If a time comes when you must hire a new employee, it’s important to note all of the things that could go wrong. You may be able to save money by taking the time to slowly get to know job candidates and make sure you’re hiring the right one before an employment offer is made.

Entrepreneur and Venture Advisor for the Network of Things Fund a Draper Nexus Fund. Newlands received a Bachelor of Laws and he is qualified as a Lawyer. He gained his Green Card by being recognized by the US government as an “alien of extraordinary ability.” Newlands is the author of “Online Marketing: A User’s Manual” published by John Wiley. He is former President of Due.com

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