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Bradford D. Smart, author of TopGrading and a world-class leader in the field of personnel management, studied mis-hire data supplied by 54 companies. He concluded that the cost of mis-hires is around 25 times the base compensation for those under $100,000 and 40 times for those earning $100,000 to $250,000.
His calculations started from the premise that compensation paid to an employee is an investment. We pay out money with the hope of getting a return on investment. When the hire fails to deliver results (i.e., a contribution to profit), we lose not only our direct investment (salary, benefits, taxes) and the profits that should have been earned but also suffer significant productivity loss throughout the organization due to the related disruption.
The lesson? Hire right. Inability to hire and retain talent that delivers results can sink a company.
This article originally appeared in The Business Owner Journal, the periodical of choice for owners of small and midsize private businesses. All rights reserved, D.L. Perkins LLC. © 2010.
This publication is intended to provide general information on the subject matters covered. It is sold and distributed with the understanding that neither the publisher nor any distributor or advertiser is engaged in providing legal, tax, insurance, investment or other professional advice. The advice of a qualified professional should be sought before any reader applies a concept presented herein to his or her particular situation or business.
D.L. Perkins, LLC is solely responsible for this content.
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