You approve a $200,000 salary for a new VP of Finance. It's a real number, so you plan for it, you budget it, you sign off.
Here's the number that never makes it onto the plan: what it costs if the person turns out to be wrong. For an executive role, that runs between $240,000 and $850,000.
You budgeted for the salary. Almost nobody budgets for the mistake.
What a bad hire actually costs
The headline number is well established. SHRM estimates that replacing an employee costs somewhere between 50% and 200% of their annual salary, and executive roles sit at the top of that range. Some research puts the cost of a senior mis-hire as high as 213% of salary, and in the worst cases up to five times it. On a $200,000 executive, that's a swing toward a million dollars.
Add up the pieces and the commonly cited all-in figure for a bad executive hire, counting severance, lost productivity, team disruption, and running the whole search a second time, lands between $240,000 and $850,000.
Why the number is bigger at the top
The visible costs, severance and re-running the search, are the smaller part. The damage that doesn't show up on an invoice is larger. A wrong VP of Finance sets the wrong priorities, hires the wrong people beneath them, and stalls initiatives that take a year to restart. Around 85% of HR leaders say a single bad hire drags down the morale and output of the whole team around them. At the executive level, that team is an entire function.
“The salary is the cheapest part of a senior hire. Getting the person wrong is the expensive part.”
More than 40% of executive hires fail. Here's why
Research from the Center for Executive Succession found that over 40% of executive hires don't last 18 months. Most of those failures trace back to the same root: the person was hired on how they looked on paper rather than evaluated for the actual job. A polished resume, the right keywords, a confident interview. None of that predicts whether someone can do the work once they're in the seat.
That gap between how a candidate presents and what they can actually do is exactly where the cost hides. It's also the one part of hiring a real evaluation process is built to close.
What actually lowers the cost
Speed helps, but precision is what protects you. Three things move the number:
Evaluate through an operator's lens. Someone who has done the role can tell the difference between a candidate who did the work and one who can describe it. That judgment is what a resume can't give you.
Verify the substance behind the resume. Probe for the specifics only real experience produces: what broke, what it cost, what they'd do differently. Confident generalities are the tell.
Send one right person instead of a stack of maybes. A considered shortlist lowers the odds of the expensive mistake. A proper retained process exists to bring the mis-hire rate down, which is the entire point of paying for it.
The math to run before your next senior hire
Take the salary. Multiply it by 2 to 5. That's your exposure if the hire is wrong. Put that number next to the cost of running the search properly, and the search stops looking like the expensive line on the page.
About ICA
I'm April Ben-Sabat, founder of Inner Circle Agency. I built my career in finance, accounting, HR leadership, and industrial operations before starting ICA. ICA recruits for the roles I used to hold, so our team evaluates candidates the way a board would, because that operational experience is baked into how we work.
ICA is boutique by design. We take on a small number of searches at a time so every client gets senior-level attention. We specialize in Director-to-C-Suite placements across finance, ERP, and operations for mid-market companies in the US.
If you're hiring for a role where the wrong person costs you a year of momentum, let's talk.
Frequently asked questions
How much does a bad hire cost?
SHRM estimates the cost of replacing an employee at 50% to 200% of their annual salary, with executive roles at the top of that range. All-in, counting severance, lost productivity, team disruption, and re-running the search, a bad executive hire commonly lands between $240,000 and $850,000.
What does a bad executive hire cost specifically?
At the senior level the figure climbs. Some research puts executive turnover at up to 213% of salary, and the most damaging mis-hires at up to five times salary. For a $200,000 executive, that's a cost approaching a million dollars once the knock-on effects are counted.
How often do executive hires fail?
More than 40% of executive hires fail within 18 months, according to research from the Center for Executive Succession. The common thread is candidates hired on how they present rather than evaluated for the actual demands of the role.
How do you reduce the risk of a bad hire?
Evaluate candidates through the lens of someone who has done the job, verify the substance behind the resume in conversation, and work from a considered shortlist instead of a pile of plausible options. A retained search process is built specifically to lower the mis-hire rate.