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CareerBuilder looks at cost of bad hire and background checking practices

December 1, 2016

By Michael Burns, courtesy of SBAM Approved Partner ASE

CareerBuilder sponsored an online study by Harris Poll that asked 2,379 hiring managers and HR professionals about their experience with the cost of a bad hire. They also asked about what employment background checking Practices were used to support effective hiring practices. Bad hires can be costly.

The CareerBuilder survey found that the cost of a bad hire averaged $17,000. Survey respondents reported that their bad hire costs came from:

  • Less productivity: 36%
  • Compromised quality of work: 33%
  • Affected employee morale negatively: 31%
  • Lost time to recruit and train another worker: 30%
  • Cost to recruit and train another worker: 30%
  • Employee’s managers or coworkers had to spend excessive time assisting bad hire: 29%

The costs varied by size of employer. Employers with 500 employees or less reported an average cost of $11,000 per bad hire. Employers with 501 – 1000 employees reported an average cost of $22,000 and employers with over 1000 employees calculated an average bad hire cost of $24,000.

Interestingly, 20% of the respondents said they knew it was a bad hire within just one week, while over 53% said they knew the wrong hire was made in the first three weeks of employment.

One important step to avoiding a poor hiring decision is to conduct a thorough background check. The survey found that over 70% of the employers responding conducted background checks on the candidate. The background checks analyzed the following:

  • Criminal background: 82%
  • Confirm employment: 62%
  • Confirm identity: 60%
  • Confirm education: 50%
  • Check for illegal drug use: 44%
  • Check licensing: 38%
  • Credit check: 29%

28% of the HR and hiring professionals surveyed reported they do not do background checking – a pretty high number of employers in this day and age. 

ASE’s 2015/16 Michigan Policies and Practices Survey reported that background checks conducted analyzed:

  • Criminal background: 86%
  • Confirm employment: 81%
  • Confirm identity: 65%
  • Confirm education: 73%
  • Check for illegal drug use: 71%
  • Check licensing: 44%
  • Credit check: 34%

ASE’s survey also found that its sample reported only 6% of employers do not do any type of background checking for employment purposes.

With an average cost of $17,000 per bad hire, be sure you are conducting proper background checks on your new employees.  Any offer extended should include the stipulation that employment is “pending background check results.”  The cost of the background check will be much lower than the cost of a bad hire and will save you money in the long run.

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