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Talent Talk: The True Cost of a Bad Hire

Image: Foto Rabe/Pixabay burning money
Almost half of new hires were considered mis-hires within 18 months, according to a study. The cost to your company, and possibly your career, can be staggering.

If I asked you to estimate the true cost of a bad hiring decision, what would you guess? Studies have been conducted in this area that I will share with you. Brace yourself: You won’t believe some of these figures.

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 single person can add hundreds of thousands, perhaps millions, of dollars to your bottom line, and propel your career in the process.

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 to be 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 McDonald’s fired its CEO, Steve Easterbrook, the market value of the company decreased $4 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.

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].

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