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The role of technology in reducing the cost of a bad hire

Recruitment | 6 Min Read

The role of technology in reducing the cost of a bad hire


Hiring is a long-drawn and costly process, and despite the best efforts, it can lead to bad hires. These employees not only increase the hiring cost but also impact the business productivity. Therefore, organizations must explore ways to reduce cost per hire using efficient hiring techniques.

This blog looks at ways to reduce bad hires and the role of technology in reducing hiring costs


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Impact of a bad hire

A bad hire can make you lose money and negatively impact your business. Apart from the tangible losses, there are also intangible ones, like loss of morale and work environment degradation. Hence, it is critical to understand what makes an employee a bad hire; some common traits exhibited by them are:

  • Lack of enthusiasm and commitment toward the job
  • Not meeting the minimum standards expected
  • Not being productive during work hours
  • Displaying a negative attitude
  • Poor feedback from colleagues and customers


Common challenges faced with bad hires

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Lower productivity levels

A bad hire leads to reduced productivity levels. An employee who isn't fit for the role will deliver work that is not up to the mark and requires additional effort from a colleague or a manager. Other employees are forced to take on this extra work, increasing their workload and impacting their productivity.

Higher turnover costs

According to a survey by the U.S. Department of Labor, the cost of a bad hire can go high as can go as high as US$240,000. Furthermore, another study by The Society for Human Resource Management (SHRM) estimates that the turnover cost of a bad hire is about 40% of the individual's salary. These are just your tangible costs; a bad hire also impacts team morale. If this employee is in a customer-facing role, the company’s goodwill will take a hit.

Some expenses to consider to arrive at recruitment cost per hire:

  • Advertising fees and staff time spent on recruitment
  • Training costs
  • Relocation costs
  • Amount spent on training replacement hires
  • Disruption of projects
  • Legal fees


How to avoid hiring the wrong candidate

A bad hire can increase hiring costs for an organization, making it vital for recruiters to choose the right candidates while recruiting.

Here is how you can prevent bad hires

  • Make skill and job requirements clear: In your job description, clearly mention the level of expertise you expect from your employee and the duties required to fulfill. Then, choose a candidate with a solid skills base. It will be easier for you to train them for the job.
  • Don't let the timeline force your hand: Filling a vacant position is a time-bound task. However, in most cases, the need to meet timelines pushes recruiters to hire incorrectly. As per a survey by LinkedIn, 63% of recruiters say talent shortage is their biggest problem. This shortage forces HR to go back and hire candidates who, at first, didn’t appear fit for the role. It is mostly due to the need to fill the role within a given time frame.
  • Recruit from employee references: Hiring from references given by current employees tends to reduce bad hires. Such employees are already familiar with the company's culture and know what they can expect in their day-to-day work. It also reduces the hiring cost as you will not use any job portal or recruitment firm to get candidates.
  • Use tools to shortlist candidates: Using technology in recruitment can be a game changer. It will reduce the cost per hire and help find the right candidate for the role. Hiring tools, like the Applicant Tracking System (ATS), help streamline the hiring process, while skills assessments and psychometric tests help you hire the best candidate for the role.
  • Go for contractual candidates: If you are short on time and unsure if a candidate is suitable for the role, you can always hire them on contract. Such contracts can have a clause for extension or permanent position after a specific time has elapsed or when the candidate's performance is up to the mark.


Reducing cost per hire using technology

What is the cost per hire?


Before we look at ways to reduce costs using technology in recruitment, we need to understand what cost per hire (CPH) means.

CPH is a human resource metric. It is the total recruitment cost your company bears to fill a vacant role. Usually, CPH is calculated using the following formula:

CPH = (total costs of internal recruitment + total costs of external recruitment)/(total number of hires in a selected period)

Instead of calculating the cost for every hire, companies often use this formula to get the average cost of filling up a position.


How technology can reduce cost per hire

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1. Use an Applicant Tracking System (ATS)

An ATS, like the Mercer | Mettl Hiretrack, is software that simplifies the hiring process by automating the whole hiring process. It electronically filters, organizes and streamlines job applications as per the openings. ATS provides a simple centralized platform. Recruiters can view applicants, track their progress and filter applicants based on different requirements for different job roles.

2. Use data and analytics for better decision making

Data has slowly become an integral part of almost every function of an organization and recruitment isn’t far behind. Utilizing data and analytics allows recruiters to make better hiring decisions. It can help HR identify bottlenecks by tracking different recruitment metrics and KPIs. Furthermore, it aids in decision-making with candidate information data analysis.

Also, by analyzing the current workforce’s data, HR can learn what to look for in prospective employees. Data helps you determine skills, traits and demographics that lead to better retention and company culture.

3. Utilize assessment for screening

While ATS may automate the recruitment process, the final decision is still for the recruiter to make. They still need to sort through a candidate pool and find the perfect one. For this, HR needs a reliable screening method, especially for tech roles where resumes are insufficient to judge candidates. Assessment tools help recruiters control the hiring cost by minimizing bad hires. Assessment tests further help HRs evaluate candidates with different experience levels. These tests identify applicants’ skill sets, behavior and job compatibility and help recruitment teams make smarter decisions by eliminating inherent bias.

4. Automate repetitive tasks

Automating repetitive tasks can help you lower your hiring costs significantly while improving the recruitment process efficiency. For example, time-consuming tasks, like follow-up emails, candidate screening and notifying different stakeholders, can be easily automated to improve efficiency and reduce cost per hire.

For automation, you can use recruitment software like ATS. The software screens candidates and allows you to post jobs on multiple job boards with just a few clicks. Allowing you to reach a wider pool of candidates, which reduces bad hires.


How Mercer | Mettl can help

With over a decade of experience providing HR technological solutions, Mercer | Mettl offers various solutions that allow your organizations to streamline and execute recruitment strategies while reducing costs and bad hires.

Mercer | Mettl’s Hiretrack combines features of three systems in a single platform. It manages applications and creates and customizes workflows with ease. The platform allows your recruiting team to appraise candidates through online assessments. The assessments give a holistic view of the candidate’s psychometric, cognitive and domain competency. Furthermore, you can organize online interviews with collaborative and structured grading while keeping digital records of everything.

You can simplify hiring with Mercer | Mettl’s Hiretrack in four steps:


Configure your requirements:

Create specific job roles and define competency on the platform with ease.


Screen candidates:

Filter out applicants using assessments and psychometric tests that can be scheduled at your convenience.


Organize interviews:

Create a panel of interviewers and schedule interviews to select the best from the screened pool of candidates.


Make the final decision:

Decide to hire after looking at briefs from the recruiting team and the candidate’s score.



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The recruitment process involves many resources, especially financial ones. Hence, it is vital to know ways to reduce recruitment costs per hire while reducing the chances of hiring a bad employee. A bad hire can cost a lot of money while hampering team morale.



How does bad hiring impact the organization?

How can technology improve the hiring process?

What are the steps that a company can take to reduce bad hires?

Originally published January 23 2023, Updated January 23 2023

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About This Topic

The primary objectives of recruitment and selection are to ensure high-quality candidates who are culturally fit and work toward shared organizational goals and vision.

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