Return on Investment
In business, return on investment is king. ROI on scientifically-validated selection assessments is approximately 200% during a new hire’s first year and 800% for his or her second and subsequent years at an organization (Bernthal, 2003).
Basic calculations for the cost of a bad hire range from $15,000 for a full-time, entry-level position to $50,000 or more for upper-management and executive roles (Boushey & Glynn, 2012). Such calculations include tangable (i.e., easily quantified) costs including:
recruitment advertising fees, recruitment staff time (e.g., ad creation and dissemination, resume review, interviewing), relocation and training fees for replacement hires, outplacement services, and litigation fees
However, intangible (i.e., less easily calculated) costs are also incurred. Intangible costs may include:
negative impact on team performance, disruption to incomplete projects, lost customers/clients, time spent on performance management with the bad hire, harm to the hiring manager’s reputation within the organization, and decreased employee morale