Businesses Losing Money on Bad Hiring Practices, Survey Finds

A survey conducted by online payroll company SurePayroll found three out of four surveyed business owners admitted to hiring at least one employee they later wished they never had, and many indicated that the mistake resulted in a significant financial loss—more than $10,000 per bad hire, according to 12 percent of respondents.

According to the survey results, many small business owners are overlooking steps to reduce the likelihood of a hiring mistake. Most who admitted to bad hiring decisions said they resulted from a failure to accurately assess an employee's personality, character or skill set. The company attributes the growing trend of hiring mistakes to difficult economic times that have placed a considerable number of highly competitive and eager job seekers into the market.

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SurePayroll president Michael Alter said the businesses they talk to say they are seeing more individuals lying on their résumés or exaggerating their skill sets in order to get scarce jobs. “In a down economy, small business owners must be especially vigilant when they bring on new employees,” he warned. Survey respondents acknowledged time constraints and a dependence on “gut feelings” to judge appropriate candidates. One business reported hiring an employee without a background check, only to catch the new hire stealing from the company.

According to Alter, the best way to avoid making a bad hire is conducting candidate research during the pre-employment phase. Rather than simply relying on gut feeling, he suggests using proven, objective screening methods like background checks or skills testing. Alter notes nearly half of all small business job applicants submit résumés with false information, and skills testing helps reveal what a candidate is truly capable of before even coming in for an interview.

Alter also suggests conducting personality trait assessments and drug testing. Experts in toxicology research state that 75 percent of illegal drug users are employed, and most work for small and midsize businesses. "For small business owners, the psychological and economic strain of making a hiring mistake can be a massive burden on the company," he said. "What's more, these kinds of hiring mistakes can be reduced or avoided altogether by implementing proper precautionary measures. Investing in pre-employment screening services is worth the small upfront investment."

In some cases, the severe recession has given small business owners a larger-than-ever pool of qualified applications, increasing the strain on human resources departments and putting pressure on fully informed, carefully timed interview procedures. Perhaps unsurprisingly, SurePayroll recently announced an online suite of tools to help midmarket companies improve their hiring practices. The services are available independent of the company’s payroll processing products with no long-term contracts. SurePayroll is also offering midmarket companies Webinars explaining how the services work.