How to Calculate the Price of Mishires

Let's start from the most obvious and measurable things like direct expenses:
  • Recruitment: recruitment fee/bonus, traveling expenses for all candidates, external assessments and background investigations, sign-on bonus, relocation package
  • Salary and bonuses: all-the-time salary, all types of taxes, pension plan, all social expenses (social package), insurance, bonuses, stock options
  • Severance: retirement benefit, outplacement consultancy, possible legal costs
  • Starting procurements: furniture, computer/tablet, specific equipment, a car
  • Everyday business expenses: software licenses, specific production licenses, traveling expenses, representational expenses, assets amortization, office rent, office supply
  • And so on: team building events, business events, business clubs, education, certification

The second important thing is the cost of time:
  • Operational time: average recruitment period takes 3 months, an average wrong hired employee works for a half of a year
  • Time of people: HR-manager (recruitment, onboarding, operational activity), assistants (all the time), linear manager (recruitment, onboarding, teaching, managing, troubleshooting, firing), functional/project manager (project engagement, troubleshooting), trainers & mentors (onboarding and initial education), subordinates (onboarding and doing wrong tasks), colleagues (troubleshooting and unditching), and customers of course (initiating, controlling, troubleshooting)

And of course, you should think of problems and unseized opportunities: 
  • Shortfalls in profits: aborted contracts, slowed down and inhibited processes
  • Redundant expenses: wrong strategic decisions, headless and disastrous projects, needless procurements
  • Threats for the future: common reputational risks, possible legal consequences, discrediting management authorities (governability degradation), damage to team spirit (decreasing loyalty, possible resignations), harmed relations with clients / contractors / within a team, domino effect of more mis-hires, miscompetencies caught by the team, and so on.

Some of these can be easily counted, some look someway abstract. However, recall your last mishire, take a spreadsheet and count, value every point in currency, and draw a total. You'll be surprised of the picture you'll draw by yourself. And of course, write your thoughts and conclusions in comments.

Comments