Many business leaders, after experiencing a failed hire, become reluctant to take risks on future hires. This fear keeps them stuck in the weeds of daily operations, unable to focus on growth areas like product launches, market expansion, or strategic development.
The problem is, in today’s fast-paced business world, standing still means falling behind. As competitors continue hiring in facades to innovate and expand, companies that fail to grow are effectively in decline. Worse still, employees begin to notice when a business isn't investing in growth or their development. Talented team members may leave for competitors who offer more opportunities for career advancement, exacerbating the decline.
But just how much do disaster hires cost within the construction industry? Let's break it down.
Hiring and onboarding expenses: When a company hires an employee, it invests time and resources into recruitment, interviewing, and onboarding. This process includes advertising the position, screening resumes, conducting interviews, background checks, and providing training.
According to the U.S. Department of Labor, the average cost of a bad hire can be as much as 30% of that individual’s first-year earnings. In construction, where skilled labor wages are high, this can easily amount to tens of thousands of dollars.
Wasted salary: A disaster hire may be paid for several weeks or even months before their unsuitability for the job becomes apparent. During that time, the company pays out wages without receiving the expected value in return. For skilled positions like project managers, engineers, or electricians, this wasted salary can add up quickly.
A key factor in construction is the importance of deadlines. Projects are often governed by strict time constraints, and delays can result in penalties or lost revenue for the company. Disaster hires can derail these timelines in several ways:
In an industry where liquidated damages for late completion can be tens of thousands of dollars per day, the impact of delays caused by a bad hire can be financially devastating.
The long-term costs of a disaster hire may extend beyond a single project. If a project suffers from delays, safety incidents, or quality issues due to poor hiring decisions, it can damage the company’s reputation. Clients may lose confidence in the company’s ability to deliver on time and within budget, leading to fewer contracts and lost revenue opportunities.
In competitive markets, construction firms rely heavily on their reputation for quality, safety, and reliability. A single disaster hire can jeopardise this, costing the company not only financially in the present but also in terms of future growth and profitability.
The costs of disaster hires in the construction industry are far-reaching, encompassing immediate financial losses, project delays, safety risks, diminished morale, and long-term reputational damage. While it’s impossible to avoid every bad hire, construction companies must prioritise robust hiring practices, thorough vetting, and continuous training to minimise these risks.
By doing so, they can avoid the hefty price tag that comes with a disaster hire and ensure the long-term success of their projects and business.
If you need to speak to the team about how to avoid this, do get in touch.
