how to mitigate the risk of a bad hire

josh boesch, LUTZ Talent shareholder


Hiring an outstanding employee is important for any company interested in scaling its operations. Sometimes, such employees are not a fit on paper, but their interests and passions match them culturally. This makes talent sourcing challenging and laborious for businesses.

As the proverbial haystack gets larger, it becomes increasingly difficult to find the needle. Yet, recruiters must make an effort to find the perfect match, so their companies don’t risk incurring the cost of a re-hire. This blog will drill deeper into some of the costs associated with a bad hire and provide measures to mitigate the associated risks.


The Cost of a Bad Hire

A bad hire costs your company more than a couple of paychecks. Think of the expenses incurred in screening, hiring, onboarding, and training the candidate. According to the US Department of Labor, a bad hire can cost you up to 30% of the candidate’s first year’s salary. In their evaluation, CareerBuilder noted that 75% of companies who made a bad hire incurred an average of $14,900 as associated costs.

In addition to monetary costs, bad hires can lower the productivity of both workmates and their supervisors. In a recent study, Chief Finance Officers noted that bad hires result in managers spending 17% of their (otherwise productive) time supervising actively disengaged and poorly performing employees. Also, a study by Gallup estimates that poorly performing employees can cost a company $450-$550 billion in lost productivity per year.

Added to that is lost clients due to dissatisfaction and damaged reputation. If you resolve to fire the candidate, they can leave bad reviews of your company online, which can also damage your reputation. They can also decide to sue you for ‘wrongful’ termination, leading to extra costs in the form of legal fees. Then there is the money used to source, recruit, and onboard a replacement! Hiring the wrong talent is expensive and can significantly affect your bottom line. To that end, let us look at how to mitigate the risk of a bad hire.


Evaluate the Marketplace

Conducting a market evaluation is essential in understanding the open position in your organization. To assist in ensuring a quality hire, one must define the role, responsibilities, expected outcomes, proposed salary, etc. 

Defining the role, responsibilities, and outcomes

To better define the role, evaluate your corporate culture first. What are your values, lifestyle norms, and leadership styles? The candidate should be a fit for both the company and the role, and while technical skills are teachable, the behavior is hard to change.

Next, engage your team (could be company leaders or otherwise) to drill deeper into the vacant position’s needs. What skills and qualities are you looking for?

When done with the “internal” market evaluation, it is time to head online. Search for community sites like and LinkedIn. Use their built-in search functions and filters to comb through “position-related” profiles. The key here is to articulate the aspects that define an ideal candidate. In the end, you will have concrete knowledge of what background, skill sets, experiences, and other traits, to expect when forming an ideal candidate.

Next, use this information to craft a concise job description. Ensure that the job ad is detailed enough to help recruiters and HR professionals keep an eye on the right talent and educate potential candidates about the role’s essential requirements. Ideally, prospective candidates should have a feel of what they are signing up for – upon reading the job description.

Be sure to include:

  • The role, its responsibilities, and expected outcomes
  • The required background, skills set, experience, and ideal personal characteristics.

Pro tip: You should set the requirements’ bar high enough – as if targeting only the top 10% performers in the marketplace.

Establishing a salary range

First, determine your compensation philosophy. Next, look at pay rates for individuals doing similar duties in the same niche, industry, and region. Often, pay rates are set via market pay studies.

To ease the process, work with an external recruiter to determine what your ideal talent is earning in the marketplace. Note, a recruiter can help you determine whether your expectations are viable based on your expected performance at a given price point. 


Ensure a Large Candidate Pool

Finding prospects with the right skill set is a hurdle in talent acquisition, with the culprits being a low number of applications or limited qualified candidates. Thus, writing a concise job description and posting it on various job boards is not enough. In any case, such a strategy will only limit your candidate pool to the people actively looking for a job.

In addition to posting job ads, comb through online profiles, and send customized messages to anyone you feel is qualified. Also, tap into your network for referrals. According to Jobvite, employee referrals have a lower turnover rate compared to candidates hired through job boards. Besides, hiring through referrals is 55% faster than through a career site.

For best results, partner with a quality recruiter to help identify even the passive candidates who are highly qualified for the position. Quality recruiters have a database and network full of passive candidates receptive to another opportunity but are not actively clicking the ‘Apply’ button. They can also offer insights on hiring the right talent remotely (if it is the only option).


Follow a Structured Interview Process

The interviewing process is all about gathering data. This is done in many ways; face-to-face interviewing, skills, behavioral and cognitive assessments, and calling on references who have seen their work in action. Ask impactful and meaningful questions that relate to your company’s needs and wants. The key here is to envision how the candidate in question will contribute to your business and what influence they will have on the existing team culture. And while it may come down to using your gut in making the final decision, you should establish the following about each prospective candidate:

What they are looking for

When going through their resume and asking case, behavioral, and job interest-based questions; strive to understand the candidate’s needs. Could it be career growth, higher compensation, work-life balance, or greater responsibility?

Whichever it is, understand what the candidate is looking for and determine whether you can meet their demands. People will be more motivated and productive in your workplace, and will want to stick around longer if they perceive your organization to be meeting their needs.

Their story

Dig into their previous roles. That is, what were the candidates hired to do? What did they do? Their strengths and weaknesses? Why did they leave their positions? What would their manager and teammates say about them?

While learning their story, check their online presence. Does the candidate use proper judgment in what they share about themselves? What online presence do they have? What do the comments in their posts reveal about them?

Check references!

Never skip checking references for any potential candidate. It is your one chance to validate what you’ve heard in interviews or read on resumes. Talk to previous supervisors and managers to get their viewpoint concerning the candidate’s success in their former roles.

Be thorough. Dedicate 30-45 minutes to dig past “the confirmation of the dates of employment.” Ideally, you should know whether the candidate was a good hire, and if the reference provider seems unenthusiastic to discuss the candidate in question. Get to understand the “why.”

In conclusion, hiring the wrong candidate is very costly. However, the associated risks can be mitigated in a myriad of ways. The above methods and processes could be more time-consuming, and they require a set of skills too. However, investing a little extra time in the hiring process can pay dividends by not having to deal with a bad hire. Partner with a qualified recruiter like Lutz Talent to assist with the process whenever possible. We embrace your business as our own to energize the right solutions and help you thrive. Contact us for questions or if you need help with your staffing. 





Josh Boesch is a Lutz Talent Shareholder with over 14 years of audit and recruiting experience. He heads the Lutz Talent division, a service that helps clients identify “the ideal candidate” to meet their business goals, challenges, culture and vision. His experience as a CPA and his approach to gaining an in-depth understanding of the client’s talent needs, including the skills, experience, cultural understanding and personality fit, has been integral to his success.

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  • Nebraska Society of Certified Public Accountants, Accounting Careers Committee Vice Chairman
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  • BSBA, Accounting and Managerial Information Systems, Creighton University, Omaha, NE
  • St. Vincent de Paul Parish, Volunteer
  • Knights of Columbus, Finance Committee and Membership Vice Chairman


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