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The Cost of Wrong Hires
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The Cost of Hiring
the Wrong People!

To understand the importance of hiring the right people, let's look at the cost of hiring the wrong people. Industry experts estimate the cost of replacing an exempt employee ("exempt" from wage and hourly regulations) at 1X - 1.5X the employee's salary plus benefits. For an executive, the cost increases to 3X - 5X the executive's salary plus benefits. 

Do these estimates seem unusually high? Consider all of the factors that impact your bottom line when you've hired the wrong person:

Let's look at some numbers:

The base salary for an executive averages $189,543 for a $3 million company up to $268,092 for a $10 million company.(1) Six months severance for an executive of a $10 million company will cost a company $134,046 in salary severance, health insurance, outplacement services and any bonuses or immediate vesting, plus recruiting, hiring and training costs for a replacement and costs of productivity loss. This seemingly small severance package could easily run up a bill in the $300,000+ range. This doesn't even factor in the hidden costs mentioned above. 

Although the impact to your bottom line for a lower paying position is less, there is often more turnover at this level, causing a significant drain on your finances.  The loss of three $32,000 a year employees, for instance, could easily add up to $144,000 or more in replacement costs. And yet, candidates at this level are seldom given the kind of thorough assessment that is necessary. At all levels, turnover costs are a reality that you can not afford to overlook.

So what's the answer?

Itís really this simple: Smart organizations select, hire, retain and develop the right people and put them in the right positions. The best teams have great players and those players are used correctly!

How can you make it happen for your company? Give us a call at 410-499-0516 and we'll show you how.

(1)Data from the Economics Research Institute of Redmond, Washington. (n.d.). Retrieved from Business Week,
August 8, 2000: http://www.businessweek.com:/smallbiz/0008/sb000808.htm?scriptFramed

 

 

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