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Apr 16,2021

The True Cost of The Wrong Hire.

Why Executive Search Recruitment is Worth The Recruiter Fee

When your company’s growing and you’re deciding on whether to call in the executive search experts, or take on recruitment yourselves, cost will be a huge deciding factor. There’s the cost of one versus the other, but also the hidden cost: the cost of the wrong hire. Naturally, this is more likely to occur when you take on recruitment yourselves due to lack of specific experience.

What will the wrong hire realistically cost you on top of the time and money you’ve already committed to recruitment yourselves? We’ve broken it down for you.

1. Financials

Diving straight into the bread and butter, it’s the financial cost. The REC published a report finding that 1 in 10 of respondents who’s business has made a poor hiring decision for a senior role expect it to have cost the business at least £100,000 in the past year.

The report continues that once you do the calculations a poor hire on a salary of say, £42,000, can end up costing you £132,015 to rectify. This is an accumulation of a number of factors, including but not limited to:

  • Increased sickness/absence associated with mis-hires
  • Wasted training costs for mis-hires/under performers
  • Salary settlement and severance packages
  • Direct replacement costs: advertising costs, internal referral rewards, % of annual earnings of new recruit until reaching optimal productivity, induction and training costs, % of annual earnings of co-workers and supervisors for their time spent on bringing the new hire up to speed.

It clear to see how the financial cost adds up when you factor in having to start your search again, getting it right the first time is essential.

These issues are prevalant among corporate giants in the Silicon Valley too; a Forbes article in 2016 reported that Zappos CEO Tony Hsieh estimated bad hires to have cost the company over $100 million.

2. Employee Morale

"A bad apple spoils the bunch"

The REC estimates that a bad hire can trigger a 5-50% drop in morale, particularly in a poor management hire. It is likely that employees may become burnt out as they pick up the slack from the disengaged hire that's not pulling their weight. On top of this, WIRED has reported that happy people are 12% more productive, so a poor organisational fit can soon affect both workplace positivity and productivity.

Countering the impact of this can be difficult; retraining employees away from bad behaviours and practices they may have learnt from the wrong hire and attempting to shift the company culture back to a positive, productive workplace.

3. Company Reputation

A drop in morale can have wider consequences in the form of increased staff turnover as your employees seek a better working environment. This can be cumulatively devastating as remaining employees begin to feel that the company is buckling and feel the need to flee too.

A high staff turnover is a killer for your reputation, and you will find filling these vacant roles increasingly difficult when the reason for the vacancy is due to internal issues: the bad hire. A poor reputation is likely to also negatively impact future sales opportunities with both current and prospective clients/customers. This translates directly to more financial losses in the long-run.

In summary:

When you consider the factors together: financial implications of £132,015 to rectify a £42,000 salary wrong hire, reduced employee morale and productivity, and a plummeting reputation, the cost of the wrong hire is unacceptable. Time and expertise are required to hire the right candidate who will positively impact your business in the long-run, particularly with the senior management positions we focus on at Kevin Edward Executive Search.

The recruitment fee really is just the tip of the iceberg in what goes into saving you from a wrong hire. You’re paying for years of specialist expertise and an extensive vetting process which ensures that your vacancy is filled by the only the ideal candidate. Get in touch with us today to see how we can help with your executive search and avoid all the expense listed above.

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