From candidate cheating and fraud to skills misalignment, bad hires can happen at small businesses for all sorts of reasons. Even businesses with tested hiring processes will occasionally make a poor hiring decision.
However, for small businesses with correspondingly small teams, repeated hiring dysfunction can have far-reaching consequences. Beyond simply paying a salary to an employee who leaves soon after being hired, poorly structured hiring processes have a number of hidden costs that add up over time.
To help your small business improve its hiring process, we’ll review the potential impacts of a dysfunctional hiring process, how to avoid these common problems, and solutions to help your lean hiring team compete for the best talent.
Table of contents
Onboarding and Recruitment Costs
Hiring a new employee is a time and resource-intensive process, and energy devoted to candidates that don’t work out is energy wasted. Consider all of the people involved in your hiring process and how you can help them make better use of their time and resources:
The Costs for Managers
Training is essential for retaining newly recruited employees, meaning managers will need to devote a significant amount of their time to onboarding. During this period, both the new hire and the manager overseeing them will have reduced workloads to accommodate training activities. High turnover means more time wasted on continually training new employees. Prevent this by involving managers in the hiring process, so they can help assess their future team members.
The Costs for HR
For small businesses, your human resources team might be just one person, or you may even rely on an external consulting service. Regardless, hiring new employees will keep your HR team busy filing paperwork, running background checks, and conducting interviews. Ease the administrative burden on your HR team by creating a structured hiring process and leveraging software that improves candidate communication, systemizes the applicant assessment process, and makes adding new employees to your system easy.
The Costs for the Hiring Team
At a small business, your hiring team might consist of HR, managers, the business owner, senior employees, or anyone else available. If your small business lacks a formal HR department, hiring responsibilities will eat into other employees’ time, which can result in delays and dysfunction. Prevent this by working with an HR consultant to create a framework that streamlines the hiring process and helps you identify strong candidates.
If your business has a small team, hiring can stretch everyone’s time. A lack of dedicated focus can result in hiring process delays, further wasting your team’s time, or getting stuck in a cycle of bringing in new employees who leave shortly after getting hired.
Save time in the long run by establishing a formal hiring process instead of operating on an ad hoc basis.
Reduced Employee Morale
Poor hiring practices don’t just affect individual candidates. Rather, your entire team will feel the impacts of a disorganized hiring process, resulting in reduced morale, productivity, and even loyalty.
A few problems dysfunctional hiring can cause for employee engagement include:
- High turnover. Even if your small business is doing well financially, high turnover can leave your current employees feeling uncertain and nervous. Employees continually joining and leaving your team make it difficult for staff to establish day-to-day work routines, particularly for tasks that require teamwork.
- Increased workloads. The longer you take to find the right candidate, the more slack the rest of your team will need to pick up. As a result, dysfunctional hiring can result in increased stress and lower productivity.
- Poor company culture. Establishing a work culture can be a challenge if your hiring practices are a revolving door. Additionally, poor-fit candidates often contribute to a negative work environment, which can result in your current employees becoming disengaged.
Transparency is the key to maintaining employee engagement and trust during times of uncertainty. While you don’t need to share the nitty-gritty details of your hiring process with your entire team, you should let staff know if hiring is taking place and when you aim to bring on a new team member.
By communicating openly with employees about your hiring practices, you might also source new candidates. Your staff might encourage their friends and family to apply, expanding your pool of qualified applicants.
Lost Revenue
Dysfunctional hiring means your small business has positions open for far longer than desirable. As a result, your business may experience revenue loss due to:
- Reduced productivity. When you need a job done, and there’s no one available to complete that job, your business will have diminished productivity. While the rest of your team may be able to fill in, doing so will reduce the time they can spend on their primary jobs. In either scenario, being short-staffed will always cause a reduction in work quality and productivity.
- Slowed growth. If your business has slow hiring, you cannot grow. This results in opportunity loss, such as the inability to establish a second location, expand operational hours, or offer new services. Note that rapid hiring for the sake of growth can also lead to dysfunctional operations, such as compensation inequity, a lack of available managers, and hiring candidates without proper vetting.
- Severance-related expenses. Even if your small business does not have formal severance packages, you can still lose money if you need to terminate a new hire early. As employees grow their skills at your business, they provide increased value over time. A new hire who completes training and then quickly exits is unlikely to make up for the cost of training them, resulting in a poor return on investment.
Your small business’s staff is one of your most valuable assets, and any difficulties improving your team can have a direct impact on revenue. Remember that both hiring and replacing employees is expensive. To prevent unnecessary new hire costs, invest in employee retention efforts, like providing fair compensation and cultivating a positive work environment.
When It May Be Time for an Applicant Tracking System
When hiring breaks down on a small team, everyone feels it: open roles stay open longer, managers pick up the slack, and HR spends more time coordinating than actually moving candidates forward. The problems this article covers aren’t inevitable. Most of them trace back to the same root cause: a hiring process that wasn’t built to handle the volume, collaboration, and communication demands that come with running a real hiring operation.
The fix begins with a better framework, but often, a strong system that keeps the process moving without requiring HR to manually drive every step can be a game-changer. At least, that’s what we have found from the small-to-medium-sized businesses we work so closely with. This includes structured workflows, hiring managers who can review and respond without being chased, and candidate communication that happens automatically rather than falling through the cracks.
Hear from Recruiter, Kate Michael, about the kind of business impact adding the right hiring software can have.
Spark Hire’s applicant tracking system is built for exactly this situation: lean HR teams at companies with 50 to 500 employees who need a hiring process that works without a dedicated recruiting staff to keep it running. From job posting through offer letter, everything lives in one place, so nothing gets lost in email threads, spreadsheets, or side conversations.
If the hiring challenges in this article sound familiar, it may be time to replace the workarounds with a system designed for the way your team actually hires.
Schedule a demo to explore what’s possible.
