Calculating the Cost of a Bad Hire

Stephen Tweed | October 4, 2017 | News and Views
By Stephen Tweed The Home Care Benchmarking Study from Home Care Pulse came out in April of this year, and it again showed that turnover in the home care industry continues to rise.  Turnover in 2016 averaged 65.7% for the 646 companies that participated in the study.  Our research at Leading Home Care suggests that…

By Stephen Tweed

The Home Care Benchmarking Study from Home Care Pulse came out in April of this year, and it again showed that turnover in the home care industry continues to rise.  Turnover in 2016 averaged 65.7% for the 646 companies that participated in the study.  Our research at Leading Home Care suggests that the majority of caregiver turnover happens in the first 90 days.  If you can get a caregiver to work more than 90 days, there is a good chance they will stay with you for a year or more.

Those new hires who terminate in less than 90 days we label a “bad hire.”  It’s not that they are bad people. They are just not a good fit for the caregiving job, or for your agency.

The Bad Hire Calculator  

Several years ago, we were studying this issue and we asked the question, “What does it cost to make a bad hire?”.  We answered that question by creating the Bad Hire Calculator.  This is an Excel spreadsheet that allows you to enter in real time data from your agency. Then the calculator does the math and shows you exactly what it costs in your agency to make a poor hiring decision.

Using real numbers from one of our home care company clients in the mid-west, we calculated that the average cost of a bad hire in that company is $1,576.24.  It costs you over $1,500 for every person who leaves your agency within 90 days of hire.  If you have 100 caregivers, and 66 of them leave within a year, the out of pocket costs for that will be $104,031.84.  That’s if you live in the mid-west.  If you live in the Pacific Northwest or the Northeast, where wages and costs are higher, the cost of a bad hire is even greater.

You can find out exactly what the cost of a bad hire is in your local market by downloading the Bad Hire Calculator and using your own agency data.

What Could You Do with $104,031.84?

Having over one hundred thousand dollars to invest in better recruiting, and better retention is a lot of money.  You can make a big difference with that kind of investment.

Here are two things I would recommend you do with that money:

  1. Purchase a copy of my new book, Conquering the Crisis: Proven Solutions for Caregiver Recruiting and Retention.  ($24.99 in hard cover, $14.99 in soft cover)
  2. Bring  your leadership team together and start crafting a Culture of Attraction and Accomplishment
  3. Automate your recruiting, screening, interviewing, and selection process to hire caregivers with a better job fit

To help you automate your recruiting, screening, interviewing, and selection, we have partnered with a new company that specializes in hiring and selection for the senior care industry. Using their online system, you can put in place people and processes to improve the effectiveness of your recruiting, and you can do a much better job of selection.  We believe that retention begins with selection.  When you hire better caregivers, they stay with you longer.

To get a preview of our new Caregiver Quality Selection System, follow the link and fill out the online form.  We’ll call you to set up a time to do on online video preview of this new automated employee recruiting and selection system.

 

 

 

Stephen Tweed
Stephen Tweed, CSP, began his journey as a business strategist in home health care in 1982. Today, Stephen is among the top thought leaders in Home Care strategy and management. He has worked with top 5% companies from across the US. He is a sought after speaker at from national and state association events.

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