Talent Talk: You Will Not Believe How Expensive a Bad Hire Can Be

I want to talk about the true cost of a bad hire. What would you guess? I promise you’re going to read some figures that you won’t believe, so come into this with an open mind.

If this is so depressing, why do we need to go there? Because the real litmus test for any leader is his or her ability to field a team of top performers. If you can recruit a top performer within your industry, within your niche, and preferably from the competition, that one single person can add hundreds of thousands, perhaps millions of dollars to your bottom line, and propel your career at the same time.

Leadership IQ conducted a three-year study that found 46% of new hires were considered mis-hires within 18 months and only 19% were considered successes. These mis-hires have a direct impact on your company and your business, on your career, and potentially even on your personal life.

The star performers, the top 10%, the A-players — whatever you want to call them — are the only ones making your company money. Bestselling author Darren Hardy says that the cost of a bad hire is about six to 15 times their annual salary (the C’s) and you only break even with the average employees (the B’s).

Dr. Bradford Smart, author of Topgrading, estimated the cost of a bad hire anywhere from five to 27 times their salary. For a manager earning $100,000/year, that cost averages $1,500,000. For a sales representative, it is only $560,000. So, people are saying five times, 10 times, 15 times, 27 times . . . what’s the real top end of this? The day Carly Fiorina was fired from HP, the market value of the company increased $3 billion. Just an observation.

There are steps you can take to identify, attract, hire, and retain the people you want, and we will explore all those actions in the weeks ahead.

Image: Photobank/Adobe Stock

About the author

Paul Sturgeon is CEO of KLA Industries, a national search firm specializing in plastics, packaging, and polymer technology. If you have a topic you would like to see discussed, a company that is growing, or other ideas for this blog, e-mail Sturgeon at [email protected].