One of the most common arguments made against background and reference checking is that it is “too expensive.” While the price tag might be deterring to some employers, this sentiment is simply untrue and even more costly to your business. In reality, pre-employment background screening can be your only line of defense between an excellent new hire and poor hiring decisions.
At Barada Associates, we offer comprehensive background checks for post and pre-hire scenarios across diverse industries. Our team has been in the business for more than 40 years. We’ve seen the detrimental effect a bad hire can have on a workplace.
We created this blog to show the costs associated with making a bad hiring decision and help you and your hiring team take proactive steps to protect your business.
What is a Bad Hire?
“Bad” is sort of a subjective term. But everyone has their own idea of what a bad employee looks like. Maybe it’s the coworker who always shows up late to meetings or the staff member who makes the same mistakes over and over again, despite constructive feedback and additional support.
Ultimately, a bad hire goes beyond surface-level issues such as time management skills or simply hiring the wrong person for a specific task or duty. Bad hires refer to instances in which a new employee presents a combination of high-level issues, from misrepresenting their qualifications and falsifying records in their hiring process to clashing with the company culture and consistently experiencing productivity deficiencies or poor work quality.
The true measure of the wrong hire is if the new employee’s actions or lack thereof result in significant costs for your company, both financially and culturally.
What is the Cost of a Bad Hire?
Think hiring new employees is just a matter of salary and benefits? Think again. The true cost of a bad hire can wreak havoc on your budget. According to the Society for Human Resource Management, the average cost per hire in the United States is around $4,425. That figure can easily multiply when you take into account lost productivity, recruitment restarts, and legal fees arising from negligent hiring practices.
The financial woes don’t stop there. New employees who don’t fit the culture can drag down morale, impacting the performance of their colleagues which can cause even more negative effects whose symptoms trickle into your finances.
When new hires turn bad, there is also an increased risk for internal theft, fraud, or even substance abuse – all issues with hefty financial and legal consequences. So, while that new hire might seem like a perfect fit on paper, a closer look provided by Barada Associates’ background screening can save you thousands and ensure you choose qualified candidates that flourish, not falter.
The costs of a bad hire due to an incomplete recruiting process include:
Job Turnover
Whether you have to continuously fire and rehire new employees, or a bad hire affects other team members to the point of resignation, a bad hire is likely to lead to high job turnover. Replacing an employee can cost a company from 50%-200% of the employee’s salary.
For example, hiring costs to replace an employee who makes $50,000 per year can total anywhere from $25,000-$100,000. This is due to the costs of benefits, recruiting, training, salary, and more. You’ll also be saddled with the sunk costs associated with hiring the bad hire in the first place.
Employee Theft or Fraud
Theft or fraud caused by a bad hire is a serious issue that can have long-lasting negative effects on your company. According to the U.S. Chamber of Commerce, around 30% of all business failures in the U.S. are caused by theft or embezzlement. Having a background check performed before making a hiring decision can help protect your company from these outcomes.
Drug and Alcohol Use
Bad hires can often be defined as a new team member who abuses drugs and alcohol to the point it affects their performance at work. It’s estimated that substances like drugs and alcohol cost employers roughly $81 billion per year. Drug and alcohol testing can ensure that your employees follow local, state, and federal law, as well as your internal conduct guidelines and standards.
Negligent Hiring
Cases of negligent hiring can cost companies hundreds of thousands of dollars. The average negligent hiring case settlement is around $1 million. With the right background-checking systems in place from industry leaders such as Barada Associates, you can steer clear of negligent hiring.
What Can You Do to Make Smarter Hiring Decisions?
Hiring the wrong employee can be costly, disruptive, and damaging to every aspect of your organization. Luckily, there are some simple proactive steps you can add to your hiring process that significantly reduce the risk of a bad hire.
Above all else, engaging in some form of pre-employment background screening services is the top tactic to make lessen the negative impact of hiring decisions. At Barada Associates, these services go beyond simply skimming a resume for mistakes or oddities. We offer a multi-layered approach to verifying a candidate’s qualifications and history to paint you a clear picture of the employee before making an offer.
Additional tips to build a strong interview process include:
- Accurate Job Descriptions: Start by crafting clear and concise job descriptions that accurately reflect the required skills, experience, and character traits. This attracts qualified candidates and sets the stage for targeted screening. You can also provide candidates with strong imagery of your employer brand so they can decide for themselves if you align before ever applying.
- Conduct Background Checks: Partner with a reputable background screening company, such as Barada Associates, to conduct comprehensive checks that help qualified candidates stand out from the pack.
- Schedule Reference Checks: Verify prior employment details and gain insights into work ethic and performance with a reference check. Be sure to provide each applicant with specific reference preferences and get their permission before contacting individuals on their list.
- Request Academic & Employment Verification: An academic or employment background check can confirm educational qualifications and past employment history. While we always hope to see the best in people, there are times when a candidate may be dishonest on their resume. This screening can help catch any falsities.
- Perform Criminal History Checks: Hiring a candidate with a consistent record or violent history can put your operations, reputation, and other employees at risk. Identify potential red flags that could impact workplace safety or security with a criminal history check.
- Require Drug & Alcohol Screenings: Promote a safe and healthy work environment with both post and pre-hire drug tests. Illegal substances can be detrimental to your workforce when left unchecked, but you can avoid them in the first place by setting clear substance use guidelines in the hiring process.
- Prioritize Face-to-Face Interviews: Go beyond resumes with in-depth interviews that assess skills, experience, and cultural fit. Conducting an interview in which you can see the candidate, either in person or through a video call, can help you get deeper answers to your questions and allow you to observe the candidate’s behavior and personality which doesn’t translate through written communication.
Invest in smarter hiring today, and build a team that fuels your company’s success.
How Much Does it Cost to Run a Background Check?
When you perform a background check on potential employees, you significantly lower your risk of making a bad hire. Depending on the depth and the goal of a background check, it could cost anywhere from $10 to $500.
The real question has to be, “Can an employer afford not to perform background checks?” At the end of the day, the expense of any type of background screening is nowhere near the cost of a bad hiring decision. We recommend that hiring managers mention in the job description that a background check will be part of the hiring process. This will help companies identify the best candidates in less time.
Is Performing Background and Reference Checks Worth It?
The short answer is yes. In today’s competitive market, securing the right talent is crucial. While background and reference checks may seem like an additional expense, they are nothing compared to the cost of a bad hire.
Barada Associates offers comprehensive solutions to uncover vital information and empower informed decisions. We tailor our approach to your specific needs, industry, and compliance requirements.
We have unmatched experience in pre-employment screening and navigate complex federal, state, and local regulations with ease. Our services are enhanced by our network of nationwide partners and secure result-delivery methods.
Ultimately, background and reference checks are an investment in your company’s well-being. With Barada Associates as your partner, you gain a valuable ally in securing top talent and building a foundation for long-term success.
Contact Barada Associates for Background Checking Services
Background-checking services from Barada Associates can be the difference between making a good or bad hire. Protect your company and your existing employees by performing background checks on any potential employees. Contact us today to learn more about any of our background screening services, or to request a quote online.