The Hidden Cost of a Bad Attitude

We all know that hiring the wrong person is costly. But most people tend to think of a bad hire as one in which job skills are lacking. Job skills are important, of course, but they can be improved through training.  A truly wrong hire – and the costlier mistake – is when employees lack the right attitude toward work. The successful strategy leading companies have developed is to first hire for attitude, then train for skills.

So, how costly is it to hire employees without the right attitude? More than you might think. Let’s start with the most obvious costs. We reviewed various sources, from textbooks covering the cost of a bad hire to publications from the U.S. Department of Labor Statistics and the Society for Human Resource Management.

All these sources focus on the cost of recruiting, interviewing, testing, onboarding, training, etc., and rightly so.  For hourly employees, estimates of losses from a bad hire vary widely – from thousands to tens of thousands of dollars per hire. But few of the sources we found provide a procedure for calculating the cost of productivity loss. And none isolates the cost based on the work attitude of the employee.

A Closer Look at Cost

So, E.A.S.I.-Consult conducted its own scientific study using a return on investment (ROI) approach that looked at the cost of hiring someone with a poor attitude toward work or the organization. The study was restricted to the cost of productivity loss. We looked at the average annual salary of employees in a manufacturing company and the standard deviation (difference) in performance (using supervisor ratings) between those scoring high and those scoring low on a test for work attitude.  [See Hiring for a Stronger Workforce  (ROI Study, 2013)— E.A.S.I.-Consult.]

Annual salaries of employees were used as a point of analysis based on the following logic:

  • In well-run companies, an employee’s productivity (the value they bring to the company) is equal to or more than the amount they are paid.
  • Without this, the company could not make a profit and, therefore, could not continue to exist.

Our original study (2013) included conservative estimates beginning with low-paid production line employees working 30 hours per week at $6.83 per hour. This article provides an updated estimate of today’s typical full-time worker earning $15 per hour.  It looks at the increase in productivity of those scoring high on a work attitude test (See Work Styles Predictor®.)  Using an estimated annual salary of $79,200, we found an increase in productivity of $6,808 annually for each hire1.  If the company could improve the work attitude of just 20 percent of new hires for its 10,000-person workforce, productivity would, in turn, increase. The ROI would be a minimum of $13,616,000 annually.

But it doesn’t stop here. We need to understand the impact of an employee’s negative attitude on coworkers.  It’s the “bad apple” syndrome in which all companies should be concerned.

Bad Apples

Let’s try to translate this dynamic into dollars and cents. Using the study cited above and taking conservative estimates, assume that one person with a bad attitude toward work or the organization interacts, even occasionally, with a small circle of workers (say 20 coworkers). This sets the tone for questioning company rules or norms impacting commitment to work goals. Also, assume the negativity impacts only one in ten of the twenty workers (2 workers).  We estimate a reduction in the affected coworkers’ productivity by 20 percent of their capabilities.  This means, in addition to the potential increase in productivity of a worker with a “good attitude” ($6808), the organization will have also lost 20 percent of the potential productivity of the 2 coworkers, [2 coworkers x (20% x $6808)] or $2,723.

Again, let’s say an organization of 10,000 employees fails to screen for work attitude and hires just 20 percent of employees with a bad attitude. We can calculate the hidden cost to the organization by multiplying $2,723 X 2,000 (20% of 10,000 employees), which equals $5,446,000. (Sorry for making you do the math!)

You could call this collateral damage, damage you shouldn’t – and don’t – have to sustain.

Summary

The Complete Cost of Hiring Multiple Employees with a Bad Attitude

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Cost of a Bad Hire ….                 $13,616,000 annually

Hidden Cost of a Bad Hire ….     $5,446,000 annually

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Total Cost ….                             $19,062,000 annually

The impact of hiring employees who lack the right attitude toward work is a cost no company should pay, given the available screening tools. All it takes is the right focus during the selection process.

E.A.S.I-Consult has been researching and building objective assessment tools for selecting employees with strong attitudes toward work for over a decade. We are convinced that the ROI for focusing on work attitude, described here, is typically grossly underestimated.

Concern about employee attitude is new for organizations. Collectively, companies have spent millions on work satisfaction and employee engagement surveys, as well as work commitment measures.

These are important, but they occur after the fact. Employees coming into organizations bring their attitudes with them. Yes, they are then influenced by factors such as management practices, pay, and work environment. But starting on the right foot goes a long way toward the relationship between an employee, their employer, and coworkers.

All organizations should develop procedures for measuring work attitude before hiring employees.

1NOTE: Calculations – ROI/Utility Analysis Formula

UA = [Ns * rxy * SDy * (λ / SR)] – C

  • Ns = number of applicants selected
  • rxy = relationship between test and performance
  • SDy = standard deviation of performance – expressed in wages
  • λ = standardized value of the minimum acceptable score on the test
  • SR = selection ratio

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  • Assume applicants selected: 1
  • Relationship between WSP®/E & performance: r = 22
  • Estimated salary: $79,200
  • Standard deviation of performance – expressed in wages: $30,462
  • Standardized value of minimum acceptable score on the test: .2661
  • The selection ratio: .18 (or one hire out of 5.56 applicants)
  • Increase in productivity: $6,808

 For more information on the Work Styles Predictor® see https://easiconsult.com/work-styles-predictor/

David Smith, PhD, is the president and CEO of E.A.S.I.-Consult. E.A.S.I.-Consult works with Fortune 500 companies, government   agencies, and mid-sized corporations to provide customized Talent Management solutions. E.A.S.I.-Consult specialties include leadership assessment, online pre-employment testing, survey research, competency modeling, leadership development, executive coaching, 360-degree feedback, online structured interviews, and EEO hiring compliance. The company is a leader in the field of providing accurate information about people through professional assessment. To learn more, email us at  ContactUs@easiconsult.com or call +1.314.209.9495.