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The Cost of a Bad Hire

Sunday, October 23, 2022

When considering filling a position in a company, we all understand the importance of getting the right person to do the job, but it’s also important to think about the consequences of choosing the wrong person.

Did you know that the costs of hiring or replacing a top executive can run well over 200% of annual salary — or upwards of $200k to fill a leadership role with an annual salary of $100,000? A bad hire can actually cost a business up to 2.5 times the salary of the employee in question.

So, if you put the wrong person into the wrong role, you could be looking at a large loss for your company.

And this does not even include all the costs of a bad hire:

  • ​Recruitment advertising fees
  • ​Staff time spent on recruitment processes
  • ​Leadership time spent on recruitment
  • ​Tools and systems costs
  • ​Salary payments (yes, even if your new employee isn’t a great fit, you still have to pay them for their time)
  • ​Education and training
  • ​Staff time in training
  • ​Costs to rehire
  • ​Potential legal costs during termination
  • ​Payroll taxes
  • ​Benefits/Bonuses given
  • ​Legal compliance and insurance
  • ​The opportunity cost of missing the right candidate who could be an immediate asset to your firm

Hiring the wrong person can be a 6-figure mistake!

Having that lengthy recruitment process and then hiring the wrong person for the job costs the company both time and money and can even cost the company dearly in competitive markets when the person hired can’t deliver on what they’ve been hired to do – and then you have to start the search and incur the costs – all over again.

My recommendation to all companies, whether they are doing internal recruiting or hiring an outside firm to find their ideal candidate, is to make sure that they have a consistent system in place to identify who they are actually looking for. This goes beyond just technical abilities or skills, but further understanding where to look for qualified candidates, being able to deeply assess alignment and soft skills, and how to ensure they are able to hit the ground running with the specific goals you have in mind.

It’s important to create a strategic plan to recruit and hire new employees. Companies should take the time to create recruiting guidelines, procedures and practices for each new job position.. This includes writing job descriptions, setting compensation levels for positions you're looking to fill as well as posting ads, interviewing potential candidates, determining which applicants will move onto an interview stage where they can discuss their qualifications face-to face with members of your team.

It’s important to create a strategic plan to recruit and hire new employees. Companies should take the time to create recruiting guidelines, procedures and practices for each new job position.. This includes writing job descriptions, setting compensation levels for positions you're looking to fill as well as posting ads, interviewing potential candidates, determining which applicants will move onto an interview stage where they can discuss their qualifications face-to face with members of your team.

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