The Hidden Costs of Poor Finance Recruitment Decisions

Bad hiring decisions happen. It’s easy for business leaders to choose the wrong candidate for a role when they’re under pressure to fill skill gaps quickly and minimise lost productivity. But in the finance sector, making the wrong hiring decision can be more detrimental than you’d think.  

You’ll need to worry about more than immediate financial losses: the impact on employee morale and well-being, disruptions to crucial workflows, and even the potential for compliance issues to slip through the cracks. On top of that, losing an employee soon after hiring them can harm your employer brand, making it more challenging to attract new talent.  

Here’s the hard truth about the true costs of making bad finance recruitment decisions and a quick insight into how you can mitigate these risks.   

The Direct Financial Impact of a Bad Hire   

When companies hiring finance candidates make the wrong recruitment choice, they pay with time and money. Studies suggest hiring the wrong employee can cost up to 30% of that team member’s first-year salary. That’s because you waste significant resources on advertising roles, conducting interviews, onboarding staff members, and providing them with training.   

On top of that, there are the extra fees you’ll pay for an employee’s salary and benefits while they’re still with your organisation. If you find out your hire isn’t right for the role, you might have to pay for a severance package, increasing the price of your bad decision.   

Plus, various administrative costs are involved in “filling the gap” left by your poor hire. Once again, you must repeat the recruitment cycle, pay for advertisements or recruitment agency support, and handle onboarding and training.   

The Operational Impact: Lost Productivity and Quality Concerns  

The direct financial costs of a bad hiring decision are just the tip of the iceberg. An underperforming employee leads to significant productivity losses, as team members have to compensate for their weaknesses, reducing overall efficiency. This can lead to project delays, meaning colleagues must spend more time fixing errors than focusing on their work.   

The loss in productivity and efficiency caused by a bad hire (and the greater risk of errors and mistakes) doesn’t just damage your company’s profitability. Financial employees are responsible for various tasks that influence your organisation’s ability to comply with regulatory standards.   

If a finance professional makes a mistake with a tax report or files a crucial document after a deadline, you could face fines, legal penalties, and reputational damage. Even your clients could suffer, making it harder for you to maintain long-term relationships with customers.   

In addition, there’s the potential for data integrity issues to arise, particularly if a poor hire doesn’t know how to store, manage, and secure data correctly.   

The Team and Cultural Impact of Bad Hiring Decisions  

Every employee knows how stressful dealing with a “bad hire” on the team can be. If you choose someone to fill a role that doesn’t share your company’s values or mesh well into your company culture, team cohesion will instantly suffer.   

 Conflict can arise between teams, leading to a hostile and combative workplace atmosphere, increasing stress and disengagement. Communication and collaboration strategies can break down, making everyone less productive and efficient.  

You may even see an increased burnout among team members who are forced to shoulder additional responsibilities to compensate for a bad hire’s poor performance. This could lead to increased absenteeism, poor overall performance, and even increased turnover.   

A bad hire’s ripple effect on your team will likely lead to stagnation, a lack of innovation, and more errors among staff as people struggle to adapt to the new team dynamics.  

The Client and Stakeholder Impact  

Maintaining strong relationships with clients, investors, and other stakeholders is crucial in the finance sector. One bad hiring decision can have a disastrous impact on these connections. Clients might notice declines in service quality and errors in financial reports that make it harder for them to trust your team, jeopardising the chance of contract renewals.   

Sudden issues with efficiency and outcomes could deter investors and partners who closely monitor your company’s performance and output. This could even impact your market reputation and positioning, making it harder to attract new opportunities to your business.   

Partners may even decide to take their business elsewhere, leaving you to struggle to maintain your unique value proposition and competitive edge. Overall, a bad recruitment decision can cause your profitability, access to resources, and potential for long-term growth to suffer.   

 Long-term Organisational Costs  

A lot of the costs associated with making a poor hiring decision might seem to be “short-term”, but the reality is that the impact of a bad recruitment decision can linger for a lot longer than you’d expect. An underperforming employee can impact your department’s growth trajectory or capacity for innovation, causing you to fall behind the competition.  

To rebuild your client base, you might need to invest additional time and effort into fixing mistakes, retraining other team members, and recovering from reputational damage. The ramifications of lousy hiring choices can even impact future recruitment efforts.   

A bad hire can cause issues with morale, productivity, company culture, and turnover, which could deter future finance candidates from considering a role with your company. That means accessing top talent in a skills-short market will be even more complex.  

Mitigating the Risks: Prevention Strategies  

Avoiding the long-term and short-term impact of a bad hiring decision requires a holistic approach. The key to success is auditing and updating your recruitment process, focusing on sourcing better candidates and making more strategic decisions.   

Invest in enhanced screening methods, such as structured interviews and standardised tests, to ensure you’re prioritising candidates with the right skills to thrive in your organisation. Check references for insights into candidates’ work ethic and ability to adapt to changing business needs.  

Go beyond evaluating each employee’s hard skills to consider their attitude and personality, as well as the soft skills that will make them a valuable addition to your company culture.   

When you bring new team members into your business, consider taking a cautious approach, with probation periods that give candidates a chance to “prove themselves” before moving entirely into a role. Ensure you have strong onboarding strategies to prepare candidates for success and use performance monitoring strategies to keep track of each candidate’s output.  

Don’t wait until scheduled performance reviews to check in on your new hires. Meet with them regularly to discuss your expectations and their challenges. Work collaboratively to overcome hurdles and integrate them fully into the team.   

When a candidate chooses to leave or you decide to terminate their employment, find out what went wrong with a comprehensive exit interview. Use your feedback to inform your future hiring, onboarding, training, and management approach.   

The Path to Smarter Finance Recruitment  

The hidden costs of a bad hire go far beyond the initial expenses of paying for salaries and benefits or managing recruitment and training fees. From issues with operational performance to compliance risks, reduced team morale, and frayed stakeholder relationships, the impact of a bad hire can be more significant than you’d think.   

The key to success is a proactive, strategic approach to finding, onboarding, and supporting the right employees for your finance team. Partnering with a specialist recruitment company in the finance sector can give you the expertise and resources to optimise your hiring strategies, make more intelligent decisions, and minimise the risks of a bad hire.   

Don’t leave the success of your hiring decisions to chance. Invest in a more innovative, strategic hiring strategy for your finance team.  

Thanks 

Rachel 

About Rebus Financial Recruitment 

Rebus Financial Recruitment provides a specialist and focused recruitment service to its customers, ranging from various organisations, including SMEs, to large PLCs. 

We strive to offer both the client and candidate a seamless recruitment experience. Using our expertise, we understand employer and employee needs and match them perfectly. 

To learn more, contact one of our team members today or call us at 01282 930930.