Just about every company is concerned about the cost of a bad hire. But not everyone is taking advantage of one of the most proven ways to reduce this cost: performing pre-employment background checks.
Hires made with inadequate background information are more likely to lead to turnover. And the cost of a bad hire—whether the person quits, you terminate them, or they stay on as a disgruntled employee—is truly staggering.
According to a recent CareerBuilder survey, the average cost of a bad hire is $14,900.
Four Examples of How to Avoid the Cost of a Bad Hire
- Turnover (attrition)
When you invest in onboarding and training a new employee and then they don’t work out, you’ll lose that investment the moment they walk out the door.
Some 53 percent of employers said they would consider someone with a bad attitude to be a bad hire, while 50 percent said they would put that label on someone who doesn’t work well with others.
If employers are serious about making better hires, they need to dig deeper. By hiring a backgrounding firm that uses extensive reference checks, social media research, and educational verifications to confirm they can walk the walk as much as they talk the talk.
- Violence in the workplace
With mass shootings increasingly in the news, the possibility of workplace violence is on the minds of employees, management, and business owners alike. Their fears are not unfounded.
According to SHRM, 48 percent of HR professionals report that there has been a workplace violence incident at their organizations. Some 25 percent say they’ve had such an incident within the past year.
By using national databases for criminal history, county records, pending lawsuits, and even credit scores, you can easily avoid many of these common costs of a bad hire with a simple backgrounding service:
- Intellectual property theft
Keeping employees safe may be top of mind, but protecting intellectual property (IP) is also an important concern. IP theft is on the rise.
Due to corporate espionage, leading semiconductor manufacturer Micron Technology recently lost trade secrets worth $400 million.
According to SheerID:
- Employees steal $50 billion per year from U.S. businesses.
- 7% of annual revenues are lost to theft or fraud.
- 75% of employees have stolen at least once from their employer.
- 37.5% of employees have stolen at least twice from their employer.
- 33% of all business bankruptcies are caused by employee theft.
- 29% of theft is by employees who had ideas stolen at work.
- It takes an average of two years to detect corporate fraud.
- Labor board cases
Employee terminations don’t always go smoothly, of course. They often result in costly lawsuits.
According to CERS, the average cost of an out-of-court settlement is about $40,000. But 10 percent of wrongful termination and discrimination cases resulted in settlements of at least $1 million. When cases go to litigation, about 67 percent are ruled in the plaintiff’s favor.
Crunch the Numbers: Background Checks Pay for Themselves
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