What Are Bad Employees Costing You?
Updated: May 15
As entrepreneurs, and as professionals who provide services to entrepreneurs, we’ve seen first-hand how keeping the wrong people around can hurt a company. In fact, we’ve shared this article with a number of clients as they have worked through their hiring – and firing – decisions.
Here’s the Cliff’s Notes version – according to business coach Cameron Herold, a bad employee can cost a business up to 15 times their salary. So, to use round numbers, a problem employee making $100,000 might cost your business $1.5M. Or a toxic part-timer making $10,000 a year could cost you $150,000. When you look at it in those terms, dealing with that HR issue you’d rather ignore seems pretty pressing.
But it can seem hard to believe that the problem can be that dire.
Well, apart from their salary, and any mistakes, there’s the opportunity cost. Are you losing business because customers don’t like working with her? Have other, great employees quit, because he’s so difficult to work with? Are you spending time on HR issues rather than on growing your business?
Still, many managers fear “the devil you don’t know,” and with good reason. Letting a bad performer go, and then replacing them with another bad performer can be a huge risk – and a major setback. But the good news is that experience with the bad employee can often help you root out troubling behaviors or patterns during the hiring process, now that you know what to look for.
Another approach might be to outsource the position, if that makes sense. Obviously, not all positions lend themselves to this arrangement, but when they do, it can be a great solution. According to this article from the Society of Human Resource Management:
“By some estimates, it costs more than a quarter of a million dollars to find and hire a new employee. If that person turns out to be wrong for the role, add to that amount the toll that the bad hire takes on a manager's patience and on colleagues' morale, plus a myriad of other costs if the person needs to be replaced.”
But, if you’re not replacing them with another full time employee, the impact, should things not work out, could be far less on your business. And on the upside, the right agency will offer your highly skilled and experienced staff to take over that function.
For example, when clients have decided to outsource part or all of their operations to us, we’re able to assemble teams that have 15-20+ years of experience in key functions like office management, inventory, customer service, or benefits administration. And we’re able to build cross-functional teams, so the client is not stuck looking for one single person who can do all of those things well. Maybe someone who’s great at managing inventory isn’t so great at customer service. With an outsourced team approach, the agency you hire is responsible for finding the right person for each aspect of the job.
Whether you try the outsourced approach or hire staff to replace them, don’t make the mistake of waiting too long to let the wrong employees go. Your business is worth taking swift and decisive action – and having the right team in place!
Related Post: The Entrepreneur's Secret Weapon: Outsourcing