Most businesses believe they understand the cost of a bad hire.
They think about the salary they’ve paid, the recruitment fee they’ve invested and the cost of starting the hiring process again. While these are all legitimate expenses, they only scratch the surface.
The reality is that the financial impact of a poor hiring decision extends far beyond the recruitment process. In finance, where professionals influence reporting, forecasting, cash flow and strategic decision-making, the consequences can be even greater. One poor hiring decision can affect not only the finance team but the performance of the entire organisation.
So, how much does a bad finance hire really cost?
The Direct Cost of a Bad Hire Is Only the Beginning
When a hire doesn’t work out, recruitment costs are often the first thing that businesses focus on. This is understandable because they are visible, measurable and easy to attribute to a failed hire. However, the recruitment fee is often one of the smallest costs associated with a bad hire.
Research from the REC (Recruitment and Employment Confederation) found that a poor hire at middle-management level at a salary of £42,000 could end up costing a business £132,000 in total to resolve. Now imagine that hire is a CFO on a six-figure salary … you could be in real trouble.
Direct costs typically include:
- Recruitment fees
- Salary and benefits
- Onboarding costs
- Training and development
- Technology and equipment
- Internal recruitment and HR time
And while these costs can be significant, they are often overshadowed by the hidden costs that emerge once the employee is in the role.
How a Bad Finance Hire Impacts Productivity
Most bad hires do not fail dramatically.
There is rarely a single moment when a business realises they have made the wrong decision. Instead, performance issues tend to emerge gradually. Tasks take longer to complete, deadlines begin to slip and colleagues start compensating for gaps in performance.
Within finance teams, these issues can quickly create wider operational challenges. Delayed management accounts, inaccurate reporting or missed forecasting deadlines can affect decision-making across multiple departments.
Common signs include:
- Month-end processes taking longer than expected
- Increased errors in financial reporting
- Delays in forecasting and budgeting activities
- Greater reliance on senior team members
- Reduced efficiency across the wider finance function
While these issues may not immediately appear on a balance sheet, they create a significant productivity cost that can accumulate over months.
The Hidden Impact on Team Morale and Employee Retention
One of the most overlooked consequences of a bad hire is the effect on the wider team.
When someone consistently underperforms, the workload does not disappear. Instead, it is redistributed amongst colleagues, often landing on the desks of the highest-performing employees.
Initially, many team members are willing to help. However, over time, frustration begins to build. Employees start questioning why they are carrying additional responsibilities, correcting mistakes or compensating for declining standards.
This can result in:
- Lower employee engagement
- Increased stress and burnout
- Reduced team morale
- Higher staff turnover
- Difficulty retaining top performers
For finance leaders already facing skills shortages and talent competition, losing a high-performing employee because of a poor hiring decision can be far more expensive than the original recruitment mistake. In fact Gallup suggests that low employee engagement costs the global economy $8.8 trillion each year, equivalent to 9% of global GDP.
So ask yourself, what if a bad hire impacts our organisation’s financial performance by 9%? What impact would that have and am I doing the right things to ensure I get the right hire?
Why a Bad Finance Hire Creates a Trust Problem
Senior leaders rely on accurate financial information to make informed decisions about investment, growth, budgeting and risk management. Finance teams sit at the centre of business decision-making so when that confidence in the information begins to decline, trust can quickly erode, sometimes beyond repair.
Reports become subject to additional scrutiny. Forecasts are questioned. Stakeholders spend more time validating information rather than acting upon it. As a result, decision-making slows down and business agility suffers.
A poor hire can impact confidence in:
- Financial reporting
- Budget forecasting
- Cash flow management
- Commercial analysis
- Strategic planning
The financial consequences of lost trust are difficult to quantify, but the effect on business performance can be substantial and long-lasting. But when finance teams already spend too much of their time – up to 85% in fact – on gathering and validating data, rather than analysis and decision support, this will only get worse.
The Cost of Management Time and Leadership Distraction
One of the most expensive costs of a bad hire rarely appears in any financial report. Management time!
When an employee struggles, managers naturally invest more time in coaching, monitoring performance, resolving issues and supporting the individual. While these actions are well-intentioned, they often come at the expense of strategic priorities.
Senior finance leaders can find themselves spending significant amounts of time on:
- Additional one-to-one meetings
- Performance management processes
- Reviewing and correcting work
- Escalation meetings with stakeholders
- Recruitment planning for a replacement
Every hour spent addressing performance concerns is an hour not spent driving growth, improving processes or supporting wider business objectives. Think about it like this; 1 hour a week extra is essentially 6 business days a year lost to additional management.
The Cost of Replacing a Bad Hire
Eventually, many businesses reach the difficult conclusion that the hire is not the right fit. At that point, the process begins again. The business must restart the recruitment cycle, conduct interviews, onboard a replacement and wait for the new employee to become fully effective.
In many cases, a role can remain unsettled for six months or longer. This creates additional costs including:
- Re-advertising the vacancy
- Interviewing and assessment time
- Additional recruitment fees
- Onboarding and training investment
- Continued productivity losses
The longer a critical finance role remains unstable, the greater the impact on business performance.
And Why Good Interviews Still Lead to Bad Hires
Many organisations assume that bad hires result from poor recruitment processes.
The reality is often more complex. Some candidates interview exceptionally well. They communicate confidently, possess relevant experience and present an impressive CV. On paper, they appear to be the ideal hire.
However, interviews only provide a snapshot of an individual’s capabilities. They rarely reveal how someone performs under pressure, collaborates with colleagues or influences stakeholders across the business.
The most successful finance professionals combine:
- Technical expertise
- Commercial awareness
- Strong stakeholder management
- Cultural alignment
- Long-term growth potential
Focusing solely on their qualifications and experience can increase the risk of hiring the wrong person. The interview process should look to try and understand all the above areas to give you the best chance possible.
Laszlo Block, former SVP of People Operations at Google always had a great question he’d use. It was ‘Tell me about a time when you had to solve a problem that had no clear solution. What did you do?’. Next time why not try it out and see what response you get.
How to Avoid Making a Bad Finance Hire
While no recruitment process can eliminate risk entirely, businesses can significantly improve their chances of making successful hires.
A stronger hiring strategy should include:
- Clearly defined role requirements
- Structured interview processes
- Assessment of both technical and behavioural competencies
- Thorough referencing and background checks
- Evaluation of cultural fit and leadership style
- Access to specialist finance recruitment expertise
Many hiring mistakes occur because businesses are under pressure to fill vacancies quickly. Taking the time to properly assess candidates often proves significantly cheaper than dealing with the consequences of a poor hiring decision.
Why Working with a Specialist Finance Recruiter like We Do Group Reduces Hiring Risk
The best recruitment partners do far more than match CVs to job descriptions. They take the time to understand the technical requirements of the role, the culture of the business and the qualities that drive long-term success. This helps organisations identify candidates who are not only capable of doing the job but are also likely to thrive within the team.
At We Do Group, we specialise in connecting businesses with high-performing finance professionals who combine technical expertise with the commercial and interpersonal skills needed to make a lasting impact.
Because when a bad hire can cost more than £132,000, investing time in finding the right person is not simply a recruitment decision, it is a business decision.
