HR · 23 June 2017

Avoidable hiring mistakes cost UK employers billions each year

Hiring mistakes
Almost 40 per cent of employers said their own interview skills needed improvement

UK business owners make the wrong call on every two out of five new recruits, according to fresh research into the true cost of hiring mistakes.

The report, by the Recruitment & Employment Confederation (REC), used labour market data from the Office for National Statistics (ONS) alongside separate findings from Leadership IQ to calculate how much firms are spending on short-lived hires.

Going by REC’s formula, the number of bad hires made in the first quarter of 2017 (745,880) multiplied by average weekly earnings for full-time employees (£539 per week) meant businesses paid unsuitable recruits £402,029,320 every week.

While the figure directly refers to wages, REC stated the actual cost of hiring mistakes would be much higher, after considering the cost of the recruitment process and the impact on bottom-line profits.

The Leadership IQ study suggested over 40 per cent of hires were considered a mistake 18 months down the line. Under a fifth were viewed as long-term successes by their new employer.

Overall, almost four in ten founders said their own interviewing technique needed improvement to snuff out early warning signs.

“Getting recruitment right is even more important during a time of economic uncertainty because businesses need to ensure they’re not wasting money,” said Kevin Green, REC chief executive.

“Our calculations show that UK businesses are wasting billions every year because of the volume of hiring mistakes being made.”

While a third of decision-makers believed their hiring mistakes had no financial implications for the company, the research confirmed a different reality for employers. A short-lived candidate earning £42,000 could cost a business over £132,000.

“Shockingly, we discovered that employers are completely underestimating the financial impact of getting recruitment wrong, and not learning how to improve,” Green added.

Bill Richards, UK managing director at job site Indeed, a partner on the study, said hiring was “one of the most important aspects of business growth, but one of the most costly if done wrong”.

“In today’s tight labour market there is a full-blown battle for talent, and employers need help navigating the terrain.

Why new hires fail

Leadership IQ’s research outlined some of the most common reasons new recruits fail to meet the expectations of employers.

Just 11 per cent lacked the necessary skills for the role, leaving employers with a number of avoidable errors to idenfity.

Over a quarter received early marching orders having failed to take feedback and criticism on board, while 23 per cent were unable to manage their emotions in the workplace.

Motivation was also a factor, with 17 per cent struggling to demonstrate full effort.

Some 82 per cent of employers surveyed said subtle clues had been given towards such tendencies during the interview process, and admitted they should have listened to their instincts.

“The typical job interview process fixates on ensuring that new hires are technically competent,” said Mark Murphy, Leadership IQ CEO.

“But coachability, emotional intelligence, motivation and temperament are much more predictive of a new hires success or failure. Do technical skills really matter if the employee isn’t open to improving, alienates their co-workers, lacks emotional intelligence and has the wrong personality for the job?”

To avoid such hiring mistakes, use our essential three-part guide on recruiting your first member of staff:

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ABOUT THE EXPERT

Simon Caldwell is a reporter for Business Advice. He has a BA in politics and communications from the University of Liverpool, and previously worked as a content editor in the ecommerce industry.

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