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The High Cost of a Bad Hire and How to Avoid It

What’s the cost of a bad hire? It’s much more than you think. There’s the actual dollars and cents—an estimated 30 percent of the employee’s first year earning potential, according to the U.S. Department of Labor. Add to that the loss of productivity, morale, possible customer relationships and your culture, and the price tag is enormous. In fact, it’s been estimated by Resoomay, a service that helps technical candidates find jobs, that the ROI of a team member who doesn’t work out is -298%.

So how can you avoid a bad hire? Finding the perfect fit for each position at your company is a skill that can be learned. So to help you get started, we’re listing some of the biggest missteps and how to avoid them.

1. Hiring Too Quickly

As an entrepreneur, it’s your natural disposition to move quickly and get things done. But when it comes to hiring, it’s the absolute worst thing you can do. If you rush filling a position, odds are you’ll soon be doing it again.

The Solution: No matter how much you need someone, take your time and wait for the perfect person for the job. “Good enough” is simply not good enough. At Dave’s company, the hiring process can take several months and multiple interviews. We even interview the candidate’s spouse. A husband or wife can tell you pretty quickly whether the position is right for that person and if it will really work for the family.

Action Step: The next time you interview someone, start the process with a quick, 30-minute “get-to-know-you” initial meeting. Your objective here is mainly to listen and ask a few questions. It’s a great way to weed out the crazies and sniff out the winners who will continue on to the next interview.

2. No Job Description

Have you ever hired someone before you’ve actually figured out their duties, then, three months down the road, you can’t figure out why they’re failing? If yes, you’re not alone. Not showing someone how to win at their job each day is one of the most common mistakes small-business owners make.

The Solution: Create a detailed, written job description before you ever hire someone for a position. At Dave’s company, it’s called a Key Results Area (KRA). A KRA clearly defines in detail what the team member needs to do to be successful at their job. By writing the requirements down, you clarify the position for both yourself and the potential team member.

Action Step: Write a KRA for yourself or one of your leaders. Get feedback and refine it. Eventually, you’ll want one for every position in your company—even those you are thinking about adding in the near future.

3. Hire Employees Instead of Team Members

When interviewing a candidate for a position, your sole focus is on talent and experience. If they can do the job, the rest will naturally follow . . . or so it seems. You soon realize you’ve hired a superstar jerk, not a team member.

The Solution: Choose passion over talent every time. Do their eyes light up when they talk about the job? Are they on fire for what you’re doing? Are they full of enthusiasm? If not, keep looking. You’re not hiring a unit of production just looking for a J-O-B. You need a team member who is on a crusade for your company, and they’re always worth waiting for.


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Action Step: Your best bet for finding super passionate team members is through the ones you already have. This month, make a commitment to ask your staff for referrals. Remind them to be careful to only send the cream of the crop, not the bottom of the barrel. You have an awesome place to work, and you don’t want to spoil it with craziness or drama.

In order to grow your business, you need to have the right people on board. And that starts at the hire. By avoiding the above mistakes, you’ll be well on your way to building a team of champions who will help you win.

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Ramsey Solutions

About the author


Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.

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