Managing the cost of bad hires in the hospitality industry

Create time: Jan 24

Bad hires remain a significant issue within the hospitality industry. Not only do they result in the high turnover of staff but depending on the employee, their role, salary and duration of employment, bad hires can be extremely costly, accounting for lost time and eating into an organisation’s bottom-line.

A 2017 survey undertaken by CareerBuilder found that organisations lost on average nearly $15,000 for every bad hire they made; with three in four employers stating that they’d hired the wrong person for a position.

Furthermore, research also found that two in three workers reported to have accepted a position only to later realise that it was not for them, with half quitting within six months.

High staff turnover therefore remains a significant and ongoing problem within the hospitality sector.

This problem is compounded by a chronic skills shortage within the hospitality industry, with organisations often resorting to hiring someone who may get the job done but who is ultimately not the right personality fit for the organisation.

How do organisations address bad hires?

A 2018 article by Forbes asserts that bad hires don’t deliberately seek to present as different from when they were interviewed. In fact, it may be that the job is not what they were expecting, or that their values don’t align with that of your organisation’s… or one (or more) of any number of reasons why a bad hire occurs. There are many.

What you need to ask is whether it’s worth retaining the employee and investing further in their development or cutting your losses and seeking a new candidate.

But before you make this decision, consider the following:

Try to repair the situation

Examine why the new hire isn’t working out and seek to find the source of the problem.

Consider the following:

  • Are they having difficulty keeping up with the workload?
  • Do they understand their responsibilities?
  • Are they a good culture fit?
  • Is it simply a personality clash between employee and manager?

Once you’ve established what the problem is, you should take steps to resolve it.

This can involve the following:

  • Deliver constructive feedback that raises the issues identified with the new hire
  • Explore all potential factors that could be causing the problem
  • Seek to understand the new hire’s perspective
  • Attempt to rectify the issue and reconcile any potential conflict
Prepare yourself for a potentially uncomfortable conversation

Having to confront the issue means having a direct and potentially uncomfortable conversation with the new hire. Being direct enables you to effectively convey your concerns. It is likely that the new hire is already aware of the issues that are going to be discussed which should allow you to immediately delve into them.

It is important that this meeting is a conversation, a two-way discussion between yourself and the new hire, rather than merely stating your concerns. Be clear in why you’re having the conversation but also involve the new hire and seek their feedback and opinion. The candidate is likely to appreciate that you’ve taken the time to raise these issues because it indicates that you care and are open to solutions.

This conversation also enables you to gauge the extent to which the new hire is open and willing to change and adapt. Actively participating in the conversation and being open to your feedback indicates that the new hire is potentially worth investing in, at least in the short term. On the other hand, being resistant and not engaging in the conversation indicates that the new hire is unwilling to change and adapt and therefore should inform your decision to potentially discontinue investing in them any further.

Identify the costs of keeping the employee versus letting them go

Bad hires are expensive and don’t only affect a venue’s bottom-line but can also impact employee morale, productivity, and in some cases, result in other employees seeking work outside of your organisation.

It is important to consider the immediate and long-term costs when weighing up your options. This means that you should consider all factors, and not just the financial, including:

  • How much time do you need to invest in resolving the issues?
  • Will you get a productive return on investing in the person or will terminating their employment have its own implications?

SWOT analysis or quick risk assessment should help guide your decision making around this issue.

In the long term, finding a replacement candidate who is a good fit will outweigh the money lost on a bad hire.

In saying that, letting go of a new hire is never an easy decision, but one that may be necessary and in the best interests of both parties.


In providing a recruitment platform for some of Melbourne’s best known hospitality venues, HospoHire recognises how an organisation’s culture is an important consideration when seeking the most appropriate candidate for the job.

That is why we use aptitude tests that not only focus on essential skills but also on personality attributes to ensure that the highest quality candidates are identified. Such a method therefore goes beyond simply screening resumes but analyses culture in a way that ensures long term retention.

Visit HospoHire.com for more information.

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