The Cost of Mis-Hiring: Five times the base salary of a sales rep, twenty-seven times the base salary of an upper-level manager, and between $13MM and $53MM for a CEO, these cost not including the lost value in market capitalization. >
- The average cost of mis-hiring a sales rep earning a $100K base is $500K or five (5) times base salary. >
- The average cost of mis-hiring an upper-level manager is twenty-seven (27) times base comp. >
- The average cost of mis-hiring a CEO but not including the declines in stock price: >
- Of a large company is $53 million. >
- Of a mid-range company $22 million. >
- Of a small company $13 million. >
*** Individual Costs of a Mis-hire as defined in one of Bradford Smart’s studies: Cost in hiring; Total paid compensation; Cost of maintaining person in job; Severance; Mistakes, failures, wasted and missed business opportunities; Disruption. >
Topgrading Tips [Volume 4 #1] “Cheetah” CEOs Outperform “Lamb” CEOs >
January 14th, 2009 . by Brad Smart >
Excerpts: >
Our research [on the cost of mis-hires] (Bradford D. Smart, Phd, Smart & Associates) showed the average cost of mis-hiring a sales rep earning a $100,000 base to be $500,000+, or 5 times base comp, [and]the average cost of mis-hiring an upper level manager is 27 times the base comp. [Our numbers did not attempt to calculate] “The Cost of Disruption”(e.g. the cost of impaired morale and trying to figure out new directions).] >
CEO Magazine Research: [Analysis finds] the average cost of [mis-hiring] a CEO of a large company is $53 million, for a mid-range company $22 million, and for a small company $13 million. Appropriately, the writers noted that when there is a CEO change, 25% of the other executives depart – zoom, the costs go up. And there are 6-figure signing bonuses; zoom, the costs go higher. And the average severance is 3 times annual salary for large companies, 2 times for mid-sized companies; more zoom…. The Chief Executive [Magazine] authors put pen to paper and came up with numbers for “disruption.”… Zoom, up go the mis-hire costs. >
And those high costs of mis-hire do NOT include the cost when the stock declines. Booz Allen Hamilton research shows an average stock decline of 10%+ when there is a CEO change of a company that has been doing well. Downward Zoooom. Can the seriousness of mis-hires at the top get any worse? Yes! … >
The Chief Executive authors add some startling statistics … 40% of CEOs are gone within 18 months, 64% fail to achieve the objectives for which they were hired. >
Read full article: http://blog.smarttopgrading.com/ >
----------------------------------------------------
CEO Magazine >
The Costs of CEO Failure >
BY Nat Stoddard And Claire Wyckoff
Issue Date: November/December 2008, Posted On: 12/12/2008 >
“The impact of any change in leadership on both the company and the individual are huge” >
Read full article here: http://www.chiefexecutive.net/ME2/dirmod.asp?sid=&nm=&type=Publishing&mod=Publications%3A%3AArticle&mid=8F3A7027421841978F18BE895F87F791&tier=4&id=FD0F481A1CA94DAB9B37216C2EA15F28
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This posting was made my Jim Jacobs, President & CEO of Jacobs Executive Advisors. Jim also serves as Leader of Jacobs Advisors' Insurance Practice.
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