Hiring decisions carry enormous weight and done well, the right hire becomes an invaluable part of your business by lifting productivity, energising the team and contributing meaningfully to your goals. But when it goes wrong, it can drag down performance, morale and even profitability.
The true cost of a bad hire is often underestimated with most employers only thinking about the direct salary paid, but that can be just the tip of the iceberg.
What Does a Bad Hire Really Cost?
Depending on the level of the role, studies suggest a bad hire can cost anywhere from 30% of the employee’s annual salary to over $50,000 once you factor in the full impact.
Here’s where the costs really start to add up:
Recruitment and onboarding expenses – This can include job ads, HR hours, onboarding time and training costs. This is in addition to factoring in the weekly salary and other costs to the business in terms of the ‘seat’ including equipment and legal obligations such as WorkCover etc.
Lost productivity – Not only are bad hires often less effective, but the time required to manage underperformance can take supervisors, colleagues or managers away from their own work.
Impact on team morale – When a poor performer joins the team, it can frustrate existing staff, cause friction and on rare occasions, even lead to the departure of good employees.
Reputational damage – This is particularly pertinent for client-facing hires where a mismatch can affect your brand, client satisfaction, or project delivery.
Re-hiring costs – Restarting the hiring process is not only costly, but often adds pressure and time constraints, especially where a vacancy places additional work and pressure on a team.
Even worse, bad hires can create ripple effects that last far beyond their departure. Teams can become cautious, risk-averse, or disengaged. Business leaders may become reluctant to delegate, fearing another misstep.
Why Do Bad Hires Happen?
Despite good intentions, bad hires still happen — and often for similar reasons:
Speed over strategy – In urgent situations, businesses can rush to fill a seat rather than take the time to find the right fit.
Over Emphasis on the CV – Great experience doesn’t always mean great performance and a glowing CV can cover warning signs.
“Gut feel” hiring – While instinct is part of the process, relying solely on likability can lead to hiring people you relate to, rather than people who will excel in the role.
Unclear expectations – When a role hasn’t been clearly defined, it’s nearly impossible to measure whether someone is truly the right fit.
Ignoring red flags – Whether it’s spotty job history, vague answers or poor cultural alignment, ignoring small warning signs can lead to bigger issues later.
How to Avoid Hiring Mistakes
The good news? Bad hires can be avoided with a more intentional, structured approach to recruitment. Here’s what that looks like in practice:
1. Start With Clarity
Don’t just list tasks and titles — get clear on what success in the role looks like. What would this person need to achieve in their first 6 or 12 months? What traits will help them thrive in your culture?
When you're clear on outcomes and expectations, your hiring decisions become sharper and more objective.
2. Structure Your Interview Process
Consistency is key - start by asking every candidate the same core questions and score their responses against a clear rubric. Structured interviews reduce bias, make comparisons easier, and lead to better hiring decisions.
Include scenario-based questions and behavioural assessments that test for problem-solving, communication and values alignment — not just technical skills.
3. Look Beyond the CV
Experience is important, but it’s not everything. Hiring for potential — people who are coachable, proactive, and adaptable — often leads to better long-term outcomes than simply chasing credentials.
Ask yourself: can this person grow with us? Will they elevate the team, or simply fill a gap?
4. Check References Properly
Too often, reference checks are rushed or superficial. Instead of just confirming dates, dig deeper:
What was it like working with them?
How did they handle feedback?
Would you hire them again — and why (or why not)?
You’ll be surprised what you learn when you take the time to ask the right questions.
5. Involve Multiple Perspectives
Hiring shouldn't happen in a vacuum. Involving other team members in the process helps surface blind spots and build consensus on the right fit as well as ensuring buy-in, which can lead to a smoother onboarding once the person joins.
Hiring isn’t just about filling seats, it’s about building capability, culture, and momentum. While nobody gets it right 100% of the time, the cost of getting it wrong is too high to leave to chance.
Slowing down the process and making more deliberate, data-informed decisions will not only save money, it will set your business up for greater long-term success.