How Much Does a Bad Hire Costs Your Agency?

When agency owners talk about recruitment, they love to focus on the producer talent or customer service that can make them money. But what about the other side of the equation—how much does a bad hire cost you?

Right off the bat, there are a few set costs you will not be able to recoup, including whatever you spent on the job ads; the time you or your office manager spent sourcing, finding and interviewing not only the lost employee, but also all other candidates you interviewed for the role; the salary you paid the employee while they worked for you; and the time you and your other employees spent training them.

Of course, those line items represent only a fraction of what a bad hire could cost your agency. Some agencies, for example, hire recruiters that can cost over $10,000 for one hire.

And those are just the losses you can quantify. What about costs that aren’t associated with a clean dollar amount? Lower morale, clients lost due to poor performance, productivity lost—a bad hire can even drive away your great employees, especially if you are slow to fire. And the worst part of all is that when an employee fails, you need to start the whole costly process over again.

This issue has cost many an agency owner more than just money—it’s cost them the joy of running their business. If you want to succeed in hiring, you need to have a process you stick to every time. That means:

  • Taking your time.
  • Recruiting on an ongoing basis.
  • Using hiring assessments.
  • Holding multiple interviews in a short time.
  • Asking every recruit the same questions.
  • Recording the interviews.
  • Offering job shadows.
  • Having a bench of solid candidates at the ready.
  • Firing quickly once you realize the new employee isn’t working out.

If you employ these strategies, you’ll be ready and able to backfill an underperformer or a superstar who suddenly leaves. When you’re slow to hire and quick to fire, you’re more likely to find—and retain—top performers. 

John Hill is director of sales at Ideal Traits, a Big “I Hires partner. Big “I” Hires offers cutting-edge tools to help agents hire top-performing sales and service staff.

Breaking It Down

Here’s how the cost of a bad hire can play out in terms of actual dollars:

  • Advertising for two job ads at $500 per ad: $1,000
  • Recruitment efforts for five hours of your time: $1,000
  • Salary for the lost employee: $3,000 a month
  • Training costs: $1,500 a month —J.H.