Making a wrong move when hiring a top manager may cost a company more than $ 1.5 million, not including the cost of the other managers' time who participated in the recruitment process. This is how an article by Bryan Youd begins on the LinkedIn network. This article very clearly summarized the direct and indirect costs of hiring the wrong top manager. Let's have a look.
Direct costs
- The cost of hiring a the manager and his total compensation (salary, bonuses, the fees of external recruiters or the company that provided reference checking, the potential costs of relocation and legal services),
- the cost of dismissing the manager (severance pay and any legal costs),
- the cost of replacing the manager (the cost of finding a successor, payments to consultants, compensation or relocation costs of an interim manager).
Indirect costs
- Costs arising from the disruption of a business unit's performance and customer relations (the impact of employing a poor top manager on the overall business results of a company may be very significant),
- costs arising from the loss of productive leadership (costs of looking for a replacement for several months + time required to board the new manager in the corporate culture),
- costs arising from the loss of opportunities (inability to fulfil strategic objectives, inability to use market opportunities, loss of market share, poorly selected priorities),
- costs arising from the need to replace other managers (those hired a result of hiring the bad manager),
- costs arising from the loss of the company's reputation (loss of confidence among high-performing employees, decreased motivation, engagement and productivity, increased fluctuation).
How do you calculate the costs of hiring poor managers in your company? Do you have any additional criteria?
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