What a bad hire really costs

When a new hire doesn't work out, the instinct is to look at the salary paid and consider the math done. That's the small part. The real cost of a bad hire is spread across places where nobody writes it down, and that's why it gets so underestimated.

The visible cost

It's the easiest one to calculate, and even so, few companies do it in full:

• Salary and payroll costs for the months the person stayed, for work that later has to be redone or covered again.
• The termination: depending on the case, severance, notice period, and the wear of managing it.
• Repeating the search from scratch: job postings, interview hours, another onboarding. Everything you already paid for once, all over again.

The invisible cost (usually the bigger one)

• Your people's time. Every interview your sales manager conducted, every training session the team gave, every correction of the new hire's mistakes. Those are hours of your most expensive people applied to something that didn't pay off.
• The vacant position, twice. The months of the original search plus the months of the second one. If it's a sales role, that vacancy has a direct cost in sales that never happened.
• The team's morale. A failed hire overloads the people who were already there, and a quick exit plants the question of whether the problem is the company. Early turnover is contagious.
• Clients and suppliers. If the person had external contact, every weak interaction happened in your company's name.

What the people who measured it found

You don't have to take our word for it: the cost of hiring mistakes is one of the most studied topics in human resources.

• Gallup estimates that replacing an employee costs between one-half and two times their annual salary, and notes that this is a conservative estimate (2019).
• The Work Institute Retention Report puts it at one-third of the departing worker's annual salary, and adds an uncomfortable fact: three out of four causes of turnover are preventable (2017).
• According to a CareerBuilder survey conducted with Harris Poll, 74% of employers admit to having hired the wrong person for a position (2017). It's not a rare accident: it's the expected result of hiring without a method.
• And the Why New Hires Fail study by Leadership IQ, which tracked 20,000 hires over three years, found that 46% fail within the first 18 months.

The exact figures come from US studies and don't translate directly into local currency, but the proportions do travel: add up salary and payroll costs for the lost months, the hours of everyone who took part, and the cost of the vacancy, and the result almost always comes to several times the position's monthly salary. The more senior the role, the worse the math.

Why it happens

Bad hires are almost never explained by a lack of technical ability. The same Leadership IQ study quantified it: of the hires that fail, 89% fail because of attitude and fit (not accepting feedback, low emotional intelligence, lack of motivation, temperament) and only 11% because of a lack of technical skills. In our experience interviewing every week, the most common causes are exactly these:

1. The profile was poorly defined. The company looked for "someone like the person who left" without checking whether the position had changed.
2. The CV was evaluated, not the person. The experience was there, but the way of working didn't fit the team or the culture.
3. The decision was rushed. The position was urgent, so the first reasonable candidate was hired, without comparing.
4. Nobody validated expectations. Salary, work arrangement, growth: what the person expected and what the company offered were never put on the table.

How to reduce the risk

Zero risk doesn't exist, but there is proven practice for lowering it substantially:

• Map the position and the culture before searching, not along the way. It's the difference between looking for a CV and looking for a person for your company.
• Assess by competencies, with interviews that ask for real examples rather than statements of intent. According to Brandon Hall Group, companies without a standardized interview process are five times more likely to make a bad hire (2015).
• Compare: a shortlist of vetted candidates lets you decide between concrete options, instead of approving or rejecting them one at a time.
• Psychometric assessment when the position calls for it: it adds a professional reading of competencies and fit for the role.
• A written guarantee. If the process fails, the search is repeated at no cost. That aligns the recruiter's incentives with yours.

Our part

At BYS we work on exactly those points: we map your business and your culture before searching, we interview and assess as psychologists, and we present a shortlist in 6 days. And if the employment relationship ends within the first 3 months, for whatever reason, we repeat the search at no cost.

Do you have an open position and don't want to pay twice to fill it? Tell us about the role and we'll get back to you with a tailored proposal.