Hiring the Wrong Lab Director Can Be Costly
We received a press release for an upcoming book that reiterates what most of us already know: Hiring the wrong person can be costly. Interesting to note was that laboratory director mis-hires can cost a company seven times the lab director's salary.
I'd definitely like to get my hands on this book to read how the data were compiled for laboratory directory, and to learn whether it's clinical/anatomical or pharma/research lab (as you can imagine, we often get a lot of press releases that really aren't fits for the publication). Regardless, the press release appears below.
Over the years Smart & Associates, Inc. has published numerous studies of the costs associated with mis-hires. The Medical and Surgical industries have been represented in our surveys. Hundreds of managers, from 1989 until 2007, have estimated the costs associated with mis-hiring someone. Even fired people contribute something, so the value of contributions is subtracted from the costs, to produce a net cost of mis-hires. The major cost factors are compensation, benefits, recruiting, training, travel, severance... and the single biggest: wasted business opportunity.
Dr. Brad Smart, President of Smart & Associates of Wadsworth, Illinois, says, "If a sales rep is hired, and supposed to sell $1 million of product and only sells $750,000, the wasted business opportunity might be the $250,000 not sold but also the cost of mis-treating a major customer and losing that customer forever." Over the years the costs of mis-hires have remained fairly constant, in terms of the ratio of cost-to-salary. For example, the average costs have remained steady for:
- Laboratory Director: 7 times salary
- Nurse: 2 times salary
- Programmer: 4 times salary
- Mid Manager: 10 times salary
- Senior Executive: 15 times salary
In a book to be released in May 2008 (Topgrading for Sales: World-Class Methods to Interview, Hire, and Coach Sales Representatives -- New York, Portfolio), authors Brad Smart and Greg Alexander report a study in which the average cost of mis-hiring a sales representative earning $100,000 was $563,000, or about 5 1/2 times compensation. Smart says, "The dollar costs are only part of the picture. A mis-hire drags down others on the team and consumes far too much time of the manager."