Talent sourcing and acquisition continues to be a huge contributor to every company’s operating costs. A study conducted by SHRM in 2017 revealed that the average cost-per-hire is $4425.
But when you also take into account that a single turnover usually amounts to 6-9 months of the yearly salary for that role and scales exponentially depending on the experience required for that job, making the right hire becomes paramount in keeping your company functioning at peak efficiency.
Another thing to look at is a survey conducted by Fast Company which revealed that on average companies are spending $50,000 per bad hire. All of this can be avoided by simply performing a background and reference check.
Dangers of not screening your candidates:
1. Employees lie on their resumes
One of the more shocking trends in recruiting nowadays is that a whopping 58% of resumes include misleading or incorrect information, such as falsified education details and inaccurate job titles, seniority levels, and employment dates. According to a study done by CareerBuilder, which is one of the largest online job portals.
While some of them may be innocent mistakes like inputting incorrect start and end dates, some could be quite alarming. There was Marilee Jones Dean of Admissions (January 1998 – April 2007) at Massachusetts Institute of Technology who lied about degrees from Union College and Albany Medical College, neither of which has any record of her attendance. She also claimed a degree from Rensselaer Polytechnic Institute, which she attended as a “part-time, non-matriculating student,” and she never earned a degree. And more recently former Yahoo CEO Scott Thompson who made worldwide news for misrepresenting his college degrees.
2. Liable to negligent lawsuits
There were 2 incidents in the last few years that made headlines and set precedents for the practice of negligent hiring. One was a jury in an Arkansas Federal Court awarded $7 million in damages to the family of a Arkansas truck driver killed in a 2008 accident in a wrongful death lawsuit brought against a timber company and its truck driver who caused the accident.
Then on September 24, 2019, an Illinois state appellate court affirmed a jury verdict that awarded damages of more than $54 million in a personal injury lawsuit filed against a trucking company over the negligent hiring and retention of a trucker with a “disturbing” driving record who was involved in an accident while on the job.
In both cases a simple background check would have saved both these companies millions.
3 .Susceptible to cyber crime, theft and fraud
Many employer’s worst nightmare is employee theft, which amounts to 5% of all revenue earned, according to a 2014 study conducted by the Association of Certified Fraud Examiners, the study also reports that the actual amount lost to theft is around $3.7 trillion dollars annually.
In addition to theft, employers must guard against losing trade secrets, sensitive client data and internal confidential information. For example Verizon reported that 20% of their data breaches were caused by employees.
To combat these kinds of threats make sure that you are thoroughly vetting your applicants and gathering multiple references to understand how they performed in their previous jobs.
It’s sad to see many companies fall prey to bad hires that cost them millions in damages. When the solution to prevent such incidents would only cost them a few hundred dollars. Think of it like insurance, you may never end up needing it but you’ll be glad you invested in it when it does come through.