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Costs of Employing the Wrong Person

What are the real costs to your company of employing the wrong person or of not having the right person in a critical management role?

Direct costs – Reasonably measurable:
  • Salary, hiring bonuses, and contractual guarantees while employed
  • Management time involved in interviewing and evaluating a replacement
  • Recruiter’s fees and expenses, typically one-third of employee’s annual compensation, are not usually recoverable – The company may need to engage a different recruiter
 Indirect costs – Difficult or impossible to measure:
  • Lost opportunities that the employee failed to recognize or take advantage of
  • Efficiencies or changes that the employee failed to implement
  • Decisions or changes that the employee implemented that were ineffective, had to be reversed, or unnecessarily increased workload or costs
  • Delay in achieving goals or making efficiencies during the search for a replacement and the associated learning curve of the new employee
  • Disruption to operations and voids in succession plans due to loss of subordinates who left because of the employee
  • Increased potential for ethical lapses or internal controls being circumvented by disruptions or disgruntled employees
  • Reduced team successes due to the employee not being able to work with others to achieve goals or to sufficiently motivate others to do so
  • Competitor successes due to the organization’s inability to effectively implement strategy or achieve goals
  • Customer disappointment with company over management shuffles or gaps – Appearance that company doesn’t have its act together or is “having problems”
  • Negative comments spread by your competitors or former disgruntled employees that your company is having problems
  • Increased risk that the company will move too quickly to fill the opening by lowering their expectations and selecting a second-choice candidate
Getting the wrong person on your team, or as Jim Collins says in Good to Great “on the bus”, can often have tragic consequences for a business.
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