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In Hiring Excellence, Pat MacMillan examines some of the direct and indirect costs of hiring average people when what you really need is excellence. Here are his very conservative estimates for one mis-hire—a secretary in his office.

DIRECT DOLLAR COSTS OF AN INAPPROPRIATE HIRE

Interview time by staff other than the hiring manager
$500
Wasted salary (Six months at 50% effectiveness)
$5,500
Wasted benefits
$2,200
Severance
$2,100
Training on our computer systems
$2,200
Wasted time, morale, etc. of other staff
$4,000
Business, client problems, etc.
$1,000
TOTAL
$17,500
From similar calculations, here are some comparable replacement costs

    For a $20,000/ year factory supervisor — $36,500

    For a $50,000 salesperson — $171,500

    For a $150,000year technical manager — $380,000

INDIRECT COSTS OF AN INAPPROPRIATE HIRE

  • Morale is lowered.
  • Management time is wasted.
  • Business opportunities are lost.
  • Bad decisions perpetuate themselves, leading to more mis-hires. (See above.)

Are they worth it?