Entrepreneurs lose £14,000 on each bad hire

21 October 2014 -

A blend of skills shortages, rushed recruitment and inexperienced decision making is leading startup bosses to make inappropriate and costly appointments, says training outfit

Jermaine Haughton

A lack of applicants with the right skills has been blamed for a rash of bad hiring in the SME community, according to a new study commissioned by Sandler Training. In its survey of 1,000 small business owners, the organisation found that more than half of the respondents pinned a recent run of unsatisfactory recruitment decisions on a scarcity of talents, compounded by a mere trickle of interest in available posts. The problems have conspired to leave employers with severely limited choice.

Some 40% of SME bosses said that they have had to remove more than three employees from their firms over the past five years, while 14% said they had sent more than six on their way. Aiming to get a clear picture of the impact of bad hires on Britain’s youngest firms, the survey found that employing the wrong person can cost a typical small business £13,799 – factoring in costs for wages, recruitment and wasted time. In London, that figure rises to £17,900.

Breaking down the responses, the survey indicated that SME bosses’ top-three areas of concern are:

1. The quality of applications (51% of respondents)

2. Instances of poor judgment while hiring (27%)

3. Rushing the recruitment process (11%)

Furthermore, just 28% of small-business owners said they conducted three or more interviews before deciding to offer a job. Somewhat surprisingly, a quarter said they employ staff after just one interview, while the majority (47%) interview applicants twice.

Sandler Training UK CEO Shaun Thomson warned that recruiters should be more vigilant and stringent during the interview process, as picking the wrong candidate can dent a growing firm’s margins. “With unemployment at a 25-year low,” he said, “it’s not surprising that the labour market is tightening and small businesses are feeling the effect with a reduction in applications. However this doesn’t have to result in poor hires.”

He added: “The cost of investing in a robust interview process is much lower than the cost of a bad hire. By building a recruitment strategy that incorporates assessments, which will give information into candidates’ attitudes and how they should be questioned in interviews, businesses can ensure they get insight into whether they would be a good fit before an offer is made – avoiding the repercussions of bad hiring.”

On the whole, though, SMEs are fairly optimistic about their futures, with the annual Sage Business Index showing that small-business confidence in the UK economy has risen to a four-year high. Owners reported a jump of 7.81 points, to 61.76 – and are equally bullish about their future prospects, recording a score of 66.29 (a 3.74-point increase).

Almost three-quarters (74%) of the Sandler Training survey’s respondents said that their staff are critical to the success of their companies, with the most valuable employees found in Scotland, where the figure rises to 78%. In fact, when asked how much more they would pay a new recruit if they could guarantee from the outset that the individual would become a valuable team member, the owners said they would be happy to increase the salary offered by 21%.

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