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You could spend four times the salary and still be left with a vacant role. What are the real costs of a bad hire, and how can Australian businesses avoid the financial fallout? .

You could spend four times the salary and still be left with a vacant role. What are the real costs of a bad hire, and how can Australian businesses avoid the financial fallout?

by Ephram

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What’s the True Cost of a Bad Hire in Australia?


It’s easy to do some quick calculations on the monetary costs of a bad hire. The initial recruitment process can cost up to 50% of the position’s salary, and it’s estimated that the financial fallout of a bad hire can be 2x or 2.5x that salary figure before you even begin to recruit again. That means by simply hiring the wrong person, you could potentially spend four times their salary and still end up with a vacant position to show for it. Calculate that figure in regards to an executive role like a COO or a General Manager, and you’ll be talking costs that could cripple a business. Of course, this doesn’t even begin to take into account the more intangible costs of a bad hire. In one survey by Smart Company and Performia, 27% of SME owners said they'd lost money as a consequence of a bad hiring choice. 21% reported losing clients or good employees as a result.


Before you choose to go it alone with your executive recruitment process, it’s worth considering the full costs of an ineffective hire:


  • The cost of recruitment

  • The employee’s salary

  • Reduced productivity of a new executive while they learn the ropes, and the effects of this on your team

  • Team morale and turnover

  • Lost sales

  • The costs and time invested in HR advice if problems arise

  • Performance management costs

  • Termination payouts, if applicable

  • The incalculable effects on business reputation and customer relations

  • The cost of interviewing, hiring, training and support for exactly the same role all over again.


The measurable and immeasurable costs of a bad hire can quickly make HR managers evaluate their recruitment methods, so how can you mitigate the risks? Professional executive search services provide an extra level of diligence and risk management to the recruitment process. Before you even consider candidates, you can be confident that they’ve been screened for experience, qualifications and performance – all for a fraction of the cost of the wrong hire. It’s easy to see how that’s an investment worth making.