It depends on the wage you will pay, what benefits you provide, what it will cost to train that person, and how long you expect to employ him or her. For a $12.00/hour worker with modest benefits that will work for you for 10 years, you are easily looking at half a million dollars when you factor in your costs beyond salary. That same employee working for 20 years becomes a million dollar decision.

But you may say, I don’t plan to hire them for 20 years. I can only plan for five years… or three years… or 1 year (If you are planning for less than one year, you are looking for temp or seasonal help, not a “long term” employee. In which case you either hire temps, college students, or, if you need more skilled employees, contractors.) Why are you only planning for 1, 3, or 5 years? Are you planning on firing the employee after that time (regardless of how good they are… or how much money they are making you?) Are you planning on going out of business by then?

If you can honestly say yes to either of those last two questions, then you have a bigger problem than your hiring process. One that a revised hiring process can’t fix.

If you aren’t planning and working for the long-term viability of your company and your employees, then don’t be surprised when your plans come true. The short-term mentality will permeate your business (and any employees you may have.)

Now let’s look at that (possibly) million dollar decision.

What if it’s a good decision? Congratulations! It is either a result of good hiring practices or luck. Either way it good for you and good for the company. (What makes it a good decision varies in the specifics by company, but the general/overall guide is whether that employee contributes more to the success of the company than it costs to acquire and maintain that employee.) If it was by luck, be grateful (and then work on making it more than luck for the next time.)

And if it is a bad decision? I know. You’re thinking, “If it is a bad decision, I can just fire that person. I’ll just be out whatever the acquisition/recruiting cost were.” If only it were so simple. Most employers don’t have that luxury. Even in “at will” states that theoretically allow dismissal of employees for any reason or no reason at all (sometimes called “without cause”) there are other factors that act against such behaviors. It is beyond the scope of this article to explore these, but I do want to mention a couple of factors that weigh in on such behaviors.

Perhaps it wasn’t clear at the beginning that it was a bad decision. Maybe you invested time, effort, and incentives to help the employee improve (after all, you made the decision to hire him or her–you are likely to try whatever it takes to avoid having to admit to making a bad decision). So now you have more cost invested in the employee than we discussed already. Finally, it becomes apparent that the employee can’t do the job — or can’t do it well enough to make you a profit instead of a loss. How long has it taken to come to this point? Three months? Six months? A year? (I know… you are thinking “A year? Who could go a year like that?” It depends on just how not adequate the employee is. The more borderline the employee, the longer it takes to finally realize that it just isn’t going to work.)

Or perhaps it seemed like a good decision at the time but you then discovered that the candidate/employee lacked essential skills to do the job. If they are skills like learning to type, work a cash register, or operate a hand press, then you can probably get them trained and salvage the situation. If the skills are intellectual ones, like, oh, say, understanding Monte Carlo statistical theory, then they may not have the aptitude or time to acquire them. Often, an new employee will work hard to impress (both in the interview and later on the job) but eventually run out of steam from trying to cover that they are not really competent for the job. Then you discover that you made a bad hiring decision.

Or perhaps they have all the skills you want or need. But their personality is not a good fit for your company or work team. While they may “earn their keep” with their skills, if it makes the rest of the team unproductive, you may be heading into a money sinkhole. It seemed like a good decision at the time. And now, you have to use your managment skills to either fix the situation or use them to replace the person. More costs. And time. And distraction.

Even in low-paying, low-skilled jobs, turnover results in a significant cost. Retention of good employees is always cheaper than replacing them. So, even in the lower-paying arena, the cost is high. The more you can do to get good employees in to start with, the further ahead you are.

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