The costs of hiring the wrong executive

by | Aug 17, 2023

Months of effort are often poured into filling an executive-level position. Executives are one of the most visible and powerful employees of your company. They can control your company’s direction and expansion at scale, and impact culture down to each individual’s morale. 

Hiring a new executive, including a replacement for a miss-aligned hire, is estimated to cost 213% their annual salary, but with it being such a monumental decision often made with much effort, how do things still go wrong? In most cases, it’s inadequate hiring processes and short-sided interview methods that set companies up for costly mistakes. 

Why Does The Executive Hiring Process Fail?

Companies looking to hire an executive often have an urgent need, either because of succession planning or due to transformational moments that require new leaders to pivot the business. In any case, there’s pressure to meet internal demands and less executive talent than there are for mid-level and entry positions, which can rush the hiring process.

When a leadership hire falls short of expectations, it’s possible that the candidate misrepresented themselves in their interviews. More likely is that the hire falls short because: 

  • The hiring decision was focused on immediate need and not long-term vision.
  • The stakeholders didn’t prioritize their non-negotiables and, therefore, did not evaluate the candidate against top priorities with enough rigor.
  • The interview process failed to highlight the challenges this incoming executive will face, therefore missing an opportunity to set expectations and explore how they problem solve.
  • The employer did not highlight the importance of change management ahead. 

What Does Hiring The Wrong Executive Cost?

There’s an obvious financial burden associated with hiring the wrong executive and subsequently needing to hire a replacement. This equation doesn’t just add up to double onboarding costs either, as the parting executive may require a lofty severance package. Regardless, monetary costs aren’t always the biggest issue.

When filling a position again, the disruption to workforce productivity, strategic direction, and momentum could be monumental. HubSpot named decreased morale, low productivity, and stress as the top non-financial costs of hiring the wrong employee. 

Misaligned hiring decisions can also have an external impact with an average of an 11% reduction in sales and 9% increase in legal issues. The National Business Research Institute even found that 18% of companies experienced a negative impact on client relations following a miss-aligned hire.

How to Make Better Executive Hires

With such far-reaching effects, it’s crucial that companies take the time to fill executive roles with care, and that starts with strategic planning for your future business and rethinking your hiring process.

Clearly Define The Role

Even if you’re pulling from internal talent, executive roles should never be filled without proper screening and preparation. It’s crucial to determine what a successful outcome looks like for the position, which should consider people, process, product, and performance along with impact on revenue.

Consider the broader picture of your leadership team and how this hire will influence the executive functioning and cross-functional collaborations at large.

Vet Candidates Carefully 

Use in-depth screening interviews to qualify the abilities and motivations of viable talent upfront. Establish the core criteria necessary for the role and ensure proof of impact and proof of potential are summarized for the future interviewers.

An interview panel should be well-orchestrated with assigned focus attributes across each interviewer. This includes what to evaluate and what to highlight or share with the candidate. For example, VP Product may evaluate the VP Marketing on how they align marketing strategy with a product roadmap and how marketing fuels continuous customer feedback loops to influencer product design. VP Product may shed light on the roadmap ahead and where new innovations could lend to more forward-focused marketing strategies.

The cost of an executive team during hiring efforts is immense. Building a qualified pipeline of highly vetted and curated talent will serve everyone involved best. Recruiting teams can lighten the hiring expense and save executives’ time by evaluating and engaging candidates upfront. 

Interview for What Matters Most 

Instead of asking hypothetical or abstract questions, structure your interview questions to focus on their actual experiences and real-world impact within the capacities you are hoping to hire them for. Make sure your executive team is aligned on the core competencies needed and the culture you expect this leader to help carry for your company going forward. 

Be Diligent in Reference Checks

Reference checks of former executive peers, direct reports, and cross-functional teammates can shed light on an executive’s past impact and leadership style. Whether you use reference checks to evaluate the final hiring decision or to empower onboarding, be diligent in what you learn and what you document to distribute to your stakeholders. 

Get Access to The Best Candidates Possible

From start to finish, the executive hiring process can take months to complete, and internal managers may not have the skills, resources, or time to devote to the process. If you don’t have an internal recruiting expert, consider working with an executive search agency to find you the best leader possible. 

Learning From Executive Hiring Mistakes

Nailing down effective processes is crucial for long-term performance and retention — not only for the big, visible roles, but for every vacancy down to entry-level positions. So much extra care is invested into filling executive titles that, when mistakes still happen, it’s a tell-tale sign that other miss-aligned hires happening in your company. They may not be as visible or far-reaching, but they make up the fabric of your business, and they’re still important. 

The hiring strategy for your executive bench will trickle down and influence your hiring philosophies throughout the company, having a major impact on culture and long-term performance. Want to learn how top employers ensure they find the best match every time? Learn more about effective interviewing practices and how an agency like Digital Knack can help you make confident hiring decisions.  


Written by Marcia Needels