Often, companies do not think about how much bad hires at a management level can mean. Business owners and managers usually think only about the costs of salary and recruiting. But there is way more that, in case of wrong hires, can become thousands.

When we hire a manager that doesn’t fit or that is not capable of doing the job for any reason, this can have an awful effect on the employees’ productivity, because if a talented employee see that their superior is not capable of performing accordingly to its position, they will lose motivation and will rather look for a better opportunity somewhere else.

And even though it is hard to calculate, this decrease in motivation and productivity will definitely mean a cost increase to the company.

Some HR professionals estimate that bad management hires can cost between 2 and 5 times the managers salary. So, if the hired manager earns $90,000 a year, the cost of hiring and replacing this manager would be between $180,000 and $450,000.

These costs include any expenses for interviews (travel, hotel…), employee orientation and training, employee testing, COBRA fees related to termination, unemployment costs and, in some cases, even any costs related to a lawsuit in case the employee decides the termination was not fair. It can also include other costs related to relocation of this terminated manager. And of course, the company will need to start the hiring process again, spending time and money again to fulfill the same position.

And there are other costs that are way more difficult to evaluate and which are those related to the demotivation of employees, lower productivity, client discontent… that this situation can cause as side effects. And these could have devastating effects on the company bottom-line and could make the company lose their most valuable employees, if the situation extends for a long period of time.

So, before hiring a manager, we must think and analyze thoroughly in order to avoid making a bad hire, which can have terrible effects both in big and small companies. But how can we avoid making a bad hire?

First of all, it is essential to make a clear description of the position and of the responsibilities of the job, as well as the kind of personality and the communication skills the company expects from the candidate so he/she can perform the job successfully. It is not recommended to recycle the job description used in the past, as companies are not static, they change and evolve as well as the market does, so there are many chances that that certain position might have changed as well.

It is also important to determine the hiring process clearly and in advance, so everyone involved in the interviews knows in advance what the position to be covered is, what are the tasks and responsibilities to be fulfilled in the position and what the ideal candidate would be in terms of education, experience and personality. It is also essential to define which will be the person that makes the final decision on the hire.

It is important not to stick to the functional abilities of the position and also taking care of other key factors, which have traditionally been taken into account as less important skills, such as leadership and communication skills of the candidate, which can be crucial in terms of fitting into a certain organizational culture. This is something that can only be determined through personal interviews, where it is easier to recognize the personality of the candidate and see if it can fit into the company culture.

Another important thing is to use all the resources you have at your disposal. Maybe a current employee knows someone that can be the perfect match for the position. Let everyone know about the hiring process and let everyone that may want to help the HR department in the job description.

Show the candidates all they can get if they join the company. It is very important to attract those top talented employees, as they may have more than one job offer to choose from. Offer competitive compensation as well as an attractive benefits and perks plan. You don’t want to lose the perfect match just because someone else offered something slightly better.

Hiring the perfect candidate is not easy. It takes time. But the human capital of an organization is the key to success, never mind the size of the company. It is fundamental to build the best team, as those are the ones getting the best results.