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Hiring for financial positions is one of the most critical recruitment decisions a business can make, and a bad hire could cost you a lot more than you think.
We sometimes find that the true importance of finance professionals is underestimated, when the truth is that they usually underpin every other part of the business. Every area from purchasing through to sales relies on the efficiency and accuracy of the finance team. In effect, without them, the business becomes unstable from the inside out. So, if you end up with a bad hire of a finance professional, it doesn’t just mean a recruitment setback. It’s more than just a case of starting the recruitment process again, it can actually create long-term instability as well as a significant financial loss.
The financial cost of a bad hire
Let’s do the scary numbers first, shall we?
The Chartered Institute of Personnel and Development (CIPD) research showed that in 2020, the average cost of recruiting the wrong employee was around £30,000. Oxford Economics also calculated that the cost of replacing an employee, considering areas such as lost productivity, training and time, also added up to a startling £30,000 per worker.
Now, let’s be fair here and say that there is an amount of variance and, of course, a lot of generalising. The individual cost will vary depending on a lot of factors, such as the size of the team, ease of duplication of work, speed to replace the person, and so on. However, from a starting point of £30k, you are still going to end up with a significant amount of money, whatever variance you have.
There is also the question of what we mean by cost. It’s OK to average out, but we also need to account for seniority and other factors. When you do that, according to the Recruitment & Employment Confederation (REC), the figure you are looking at for a bad hire in a mid-manager role is actually in the region of £132,000. That is taking into account recruitment, training, staff churn, loss of productivity and just about every potential influence on the cost.
The takeaway message here is that a bad hire is always going to be costly and that cost could be significantly more than you expected.
So, specifically for your finance team let’s consider a typical salary range and typical role.
- £28,000 role (e.g., Accounts Assistant, Purchase Ledger Clerk): A poor hire at this level will still probably cost £12,500–£20,000. However, that doesn’t include the potential for costs due to errors and time caused by the fallout of the bad hire.
- £45,000 role (e.g., Management Accountant): At this mid-level, a bad hire could well impact in terms of poor reporting, budget overruns, incorrect forecasts and many other functions of the role. The replacement process and associated disruption could well cost upwards of £50,000, depending on the missed opportunities and errors in decisions and tasks.
- £80,000 role (e.g., Financial Controller/Finance Director): A failed hire at a senior level can be more than costly; it can be devastating. A mismanaged finance department will not only cost you in recruitment, but it can also cause investor mistrust, incorrect strategic decisions, and risk compliance. The total cost of a bad hire here will easily exceed £100,000 when reputational and operational damage are included.
A bad hire is not just about the salary or the recruitment costs ,though. It is also about the broader impact across the organisation.
Stability matters!
Now we have terrified you with the numbers (sorry, but there they are), let’s move on to the less immediately obvious costs. We mentioned stability in the team a few times so far, but in relation to direct costs. However, it’s worth taking a bit of a dive into what that also means for a business.
Finance roles are central to stability because, as we know, they underpin every other function. When the wrong person is appointed, clearly a period of instability will often follow. That could mean:
- Inaccurate Reporting: The C-Suite and other managers will naturally rely on timely and accurate financial data. A poor hire that delivers inconsistent or incomplete reporting is therefore going to undermine confidence in the numbers. When the leadership is unsure, the company is unsure.
- Compliance Risks: Mistakes in tax submissions, statutory reporting, or audit preparation can lead to fines and damaged relationships with regulators such as HMRC.
- Poor Cashflow Management: Inefficient reporting can lead to disrupted cashflow and even liquidity problems.
- Missed Growth Opportunities: If you can’t forecast accurately, your businesses may delay or avoid investments that could mean losing a competitive advantage.
- Wasted Resources: Overspending in some areas and underinvestment in others is a common result of a bad financial hire.
Finally, there is another, very unpleasant outcome of a bad hire.
- Team Disruption: Finance teams depend on clear processes. One often hugely underestimated result of a weak hire is that it can lower morale. It can disrupt workflows, and it can increase staff turnover as colleagues lose satisfaction with their jobs. It’s even possible that a bad hire will also spread a toxic work ethic through their department as they try to ‘muddle through’.
This instability is a highly toxic element to have in any business. It often spreads beyond the finance department, influencing every corner of the workplace. As sales and marketing teams managers and other employees become frustrated with the bad hire, they lose their focus and, in time, loyalty.
Does a recruitment partner help reduce the possibility of a bad hire?
In short, ‘yes’.
You are probably thinking, ‘well, you would say that’, but frankly, we have seen the results of DIY hiring for key roles like the finance team, and they can be disastrous.
Working with a specialist finance recruitment partner like AFR Consulting reduces the risk of a bad hire by ensuring every candidate is carefully matched to both the role and, just as importantly, the culture of your business. Our vetting processes, industry knowledge, and access to a broad talent network are where we excel. We are able to identify professionals who not only have the right skills but also the reliability and mindset to succeed long-term. The end result is that your business avoids the cultural problems created by a poor appointment, avoids the costs that ensue and has the peace of mind that each hire will strengthen your team.
Also, we offer an insurance policy (something you do not get from advertising) if the new recruit leaves within the first 10 weeks of starting with you, you are offered a sliding scale rebate or a free replacement (something that not many of our competitors offer) We do this not only to give you an extra level of reassurance, but also because we are confident in who we place. Let’s be honest, if we were giving rebates and free replacements a lot, we wouldn’t still be in business after 21 years!! But we do acknowledge that sometimes things don’t work out, so the insurance policy is in place to give our clients the confidence that we will do our utmost to resolve the situation.