Why a bad hire can be costly for your NZ business

Published 11 September 2024 | 2 min read

Hiring the right candidate is one of the most challenging tasks for New Zealand managers, owners, and HR. It's not just about finding someone who meets the job requirements; it’s also about ensuring they align with your company culture and team dynamics.

In today’s digital age, candidates come better prepared, with polished CVs and interview responses that can sometimes mask underlying issues. This complexity can make the hiring process feel like navigating a minefield, where one wrong step can lead to costly consequences.

Ripple effect of a wrong hire

Hiring the wrong person can be far more damaging than you might initially think. The costs go beyond the immediate financial outlay of recruitment efforts — such as job advertisements, interviews, background checks, and onboarding. There is also a more hidden, but equally significant, cost to consider: the toll on your team and organisational culture.

A poor hire can create a ripple effect that disrupts the entire workplace. They might clash with existing team members, resist company values, or simply fail to perform as expected. Over time, this can erode team morale, reduce productivity, and ultimately lead to the departure of valuable employees. When talented staff decide to leave, not only do you lose their skills and experience, but you're also forced back into the cycle of hiring and training new staff, further compounding your costs.

Let’s not forget the emotional toll on the team. Constant turnover can be exhausting, leading to frustration and disengagement among remaining employees. They might have to pick up the slack, putting extra strain on them and potentially leading to burnout. Meanwhile, time spent on recruitment, onboarding, and training is time lost from the actual running of your business.

Costs of a bad hire

The impact of hiring the wrong person isn't limited to internal dynamics. It can also affect your reputation with clients and stakeholders. A new employee who does not embody your company values, or who lacks the required competencies, can damage your organisation's standing, both internally and externally.

Consider, for example, an unqualified hire who mishandles a client relationship or fails to meet project deadlines. The damage to your reputation can take years to repair. Furthermore, in safety-sensitive industries like construction or manufacturing, a wrong hire who disregards safety protocols could result in workplace accidents, fines, and increased insurance costs — all of which are far more costly than just the salary of the bad hire. 

How to ensure a successful hire

1. Optimise job descriptions and advertisements

Start by creating clear and compelling job descriptions that not only list the required skills but also accurately represent your company culture and values. This will attract candidates who are a good fit for both the role and your workplace. A well-crafted job advertisement will help ensure you’re choosing from a pool of candidates who are both qualified and compatible with your existing team.

2. Use pre-employment trials to assess skills

Incorporate pre-employment trials into your hiring process to better understand a candidate’s skill level. For instance, you could ask a creative designer to design a report cover page for your brand or a barista to make a couple of coffees. These trials should be brief and directly related to the tasks the candidate would perform on the job. Make it clear that these tasks are part of the interview process, not paid work, and put this in writing to avoid any confusion or legal complications. Remember, the trial should genuinely assess the candidate’s ability and not be an extended period of work — which could be construed as employment under New Zealand law.

3. Standardise your hiring process

Develop a structured interview process that includes standardised questions, competency-based assessments, and consistent evaluation criteria. This ensures all candidates are evaluated fairly and consistently, reducing biases and improving the chances of making a sound hiring decision. Standardisation also helps in accurately comparing candidates based on both their technical skills and their cultural fit.

4. Invest in training for hiring managers

Make sure your hiring managers are well-versed in best practices for recruitment. They should understand the financial, cultural, and productivity costs of a bad hire and be trained in effective interviewing techniques, including how to assess cultural fit and avoid unconscious biases. Training can also cover legal aspects, such as understanding what constitutes an appropriate pre-employment trial under New Zealand employment law.

5. Leverage HR technology

Use HR technology such to streamline the recruitment process. Tools such as applicant tracking systems, video interview platforms, and automated reference checking can save time and reduce administrative burdens. We recommend HR Today's cloud based human resources platform. These technologies help create a smoother, more transparent hiring process, enhancing collaboration among team members and providing a comprehensive view of each candidate. Learn more about the HR Today Platform.

By integrating these strategies, you can significantly reduce the risks and costs associated with hiring the wrong candidate. Pre-employment trials, for example, offer a practical way to evaluate a candidate’s skills in real-world scenarios, while standardised processes and training ensure that all applicants are assessed fairly and thoroughly. Investing in technology can further enhance efficiency and improve the overall recruitment experience. A strategic approach to hiring will not only save your business time and money but also help you build a team that thrives in New Zealand's dynamic business environment.