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Is Your Recruitment Strategy A Cost Or Investment?

  • Writer: Chris Stinson
    Chris Stinson
  • Dec 2, 2019
  • 2 min read

Updated: Jan 28, 2023


cost of bad hire

A mistake that companies often make is looking at recruiting their sales staff and employees as a cost instead of an investment.


If you ask most companies what their most important investments are, they may say things like advertising, shiny new software they just purchased and implemented, research and development, etc. The reality is that hiring and retaining top employees is the most significant ROI.


On the other side of the coin is the cost mishires, which can be breathtaking in terms of both hard and soft costs. Dr. Bradford Smart, the author of Topgrading, estimates that the cost of a bad hire ranges from 5 to 27 times the amount of the person's salary.

You may be asking yourself, how can this be possible?


Let’s take a look at some of the hard costs associated with a bad hire.

  • Any fees associated with a search such as job boards, advertisements, administrative costs, insurance, and recruitment fees

  • Employee Compensation – Salary and bonuses or commissions.

  • Expenses such as company car or allowance, benefits, cell phone reimbursement, training cost, and etc

Now let’s take a look at some of the soft costs associated with a bad hire.

  • Time spent by hiring manager training and getting an employee up too speed.

  • Time spent by HR onboarding and background checks

  • Loss of new business and potential issues with current customers.

  • Missed quota

  • Uncovered territory

  • Employee morale


Let’s be conservative and say it is three times the new hire's salary. If you hire a new sales professional or sales leadership for your company at a $100k salary, that hire could cost your company $300k if you don’t get it right. Even worse, you have to go through the whole process again and hope you get it right the next time. It can be a vicious cycle.


We know that according to a Leadership IQ study, 46 percent of new hires are no longer with the company after eighteen months, and only 19 percent were viewed as a success. That leaves 55 percent of their hires as just okay. They probably would not hire them again, and they are not that the “A” players that move a company forward and helps them thrive in their market.


As a sales leader, your job is to hire, train, and retain top talent for your company. Failure to do so can wreak havoc on your professional career. A hiring manager can run the risk of company leaders losing faith in your ability to field a high-producing/quota-busting sales team.

 
 
 

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