You have spent months on the process. Role analysis, interview rounds, final candidates. You chose the one who came across as sharpest in the room. Six months later, they are not delivering, the mood in the leadership team has worsened, and you are back to square one.
It is a situation most people who have been involved in executive recruitment will recognise. And it is expensive. Not only in money, but in time, energy and the knock-on effects no one had time to foresee. In this article we go through what a bad hire actually costs, why it happens, and what separates the processes that hit the mark from those that miss.
What does a bad leadership hire cost?
The direct costs you see straight away
The direct costs are the easiest to put a figure on: salary for the period the new hire did not deliver, the money already spent on the recruitment process, and the cost of starting over. If you reach a voluntary severance agreement, a severance payment is usually added on top.
A rule of thumb is that a bad hire costs around 1.5 times the annual salary for the position. At leadership level, where the salary usually lies between NOK 800,000 and well over a million, we are quickly talking about sums between NOK 1.2 and 2 million, in direct costs alone.
The indirect costs no one counts
The direct costs are nevertheless not what does the most damage.
Harvard Business Review documents that indirect costs such as weakened team dynamics, delayed projects and lost reputation can push the total up to 2 to 3 times the annual salary. A leader who does not work makes decisions that affect strategy, culture and results. Putting that right takes time. The higher up in the organisation the bad hire happens, the further the consequences reach.
We see this in executive recruitment processes across the public sector, health trusts and commercial organisations: the price is paid long after the person has left.
Why do bad hires happen, even to experienced recruiters?
Research from BI Norwegian Business School establishes that experience with recruitment does not necessarily make you more accurate. The reason is that the most common mistakes are structural, not individual. The same traps recur.
Gut feeling and unconscious bias
BI researcher Ole I. Iversen points to two recurring patterns: confirmation bias, where we seek information that confirms the impression we have already formed, and similarity bias, where we unconsciously land on candidates who resemble ourselves. The result is that the person who comes across best in the room is not always the best in the role.
Time pressure and haste
When a key person leaves and internal pressure mounts, interview rounds are cut and requirements are adjusted along the way. Gut feeling takes over where structure should have steered. A bad hire costs far more than a few extra weeks with a temporary solution, but that is hard to see in the moment.
An unclear job analysis and requirements specification
Without a thorough job analysis up front, you lack an objective benchmark for assessing candidates. You do not know what you are actually looking for. SHRM estimates that structured recruitment processes with a clear requirements specification, competence-based interviews and systematic testing have a success rate of 80 to 90 per cent. Without that structure, the outcome is far more uncertain.
What separates a recruitment process that hits the mark from one that misses?
A structured, competence-based interview
A competence-based interview is a method in which all candidates are assessed against the same, predefined competence requirements. Instead of a free-flowing conversation, concrete questions are asked about behaviour in relevant situations. The method reduces the scope for bias and provides a better basis for comparison.
Psychometric tests as an objective benchmark
DNV-certified psychometric tests provide something an interview can never provide on its own: a standardised picture of the candidate’s personality, cognitive capacity and leadership behaviour. Combined with a competence-based interview, this provides a considerably better basis for predicting who will actually succeed in the role.
A reference check that actually gives answers
Many reference checks are a formality. The questions are general, the answers give little. A good reference check is structured, specific and used to challenge, not confirm, the picture you already have of the candidate.
What do you do when you are in doubt about the final candidates?
You have two to three good candidates in the final round, but you are unsure. What is the right move?
Bring in an independent third party for a structured final assessment. This involves an in-depth interview, DNV-certified tests, a reference check and a written report. You get an objective, comparable basis without internal relationships or group pressure influencing the conclusion. Such an assessment costs a fraction of what a bad hire costs.
Final interview and assessment, an extra check when it counts
Habberstad rekruttering og utvikling offers a final interview and assessment as a stand-alone service, independent of who carried out the recruitment. We assess 2 to 4 final candidates through an in-depth interview, DNV-certified tests and a thorough reference check, and deliver a written final report with a clear recommendation.
Statskog SF has used this service for over ten years. The result: zero bad hires at leadership level throughout the entire period.
The service is well suited when there is internal disagreement about who is the right candidate, when the position is critical and the risk of missing is high, or when you have carried out the process yourselves and want an independent quality check.
The right candidate, first time
Two out of three leaders admit to having made bad hires, and most describe it as an experience they do not want to repeat. A bad leadership hire is rarely bad luck. It is most often the result of a process that lacked structure, time or an objective outside perspective.
There is no guarantee in recruitment. But with the right process and an independent final assessment, you reduce the risk and increase the chance of getting it right the first time.
Get in touch for a no-obligation chat about how we can help you.
