The cost of a mis-hire: a working model for engineering teams under 50

Most companies can tell you what a hire costs. Almost none can tell you what a wrong hire costs, which is why hiring budgets are argued about in terms of recruiter fees and almost never in terms of the thing the fees exist to prevent.

We built this model from 71 documented mis-hire cases at companies with between five and fifty engineers, where the hiring manager agreed to a structured retrospective at resolution. It is a working model built on a small sample, not a law of nature, and we have published the assumptions so you can disagree with them.

Salary is the small part

The median all-in cost was $214,000, against a fully-loaded senior salary of $140,000. Nine months of salary ($62,000) accounts for 29% of the total. Recruiting and re-hiring together add another $22,000, which is the figure most companies actually budget for.

The rest, roughly $130,000, is the part that never appears on a line item. The largest component is team drag: the time other engineers spent unblocking, correcting, re-explaining and quietly redoing. At a median of $61,000 it is nearly as large as the salary itself, and almost no organisation in our sample was measuring it.

Rework adds $23,000, management time $16,000, and the opportunity cost of the work that simply did not happen another $21,000. This last figure is the softest number in the model and we would treat it as indicative rather than precise.

The gap between knowing and acting

Figure 2 contains the most actionable finding here. The median manager recognised the problem at 5.2 months. The median resolution happened at 9.0 months. That 3.8-month gap is not indecision about the facts; it is the time it takes to work up to a difficult conversation, exhaust the improvement plan, and get sign-off.

Cost accrues fastest in exactly that window, because by then the engineer is embedded in the work and the drag on colleagues is at its peak. A month of delay at month seven costs roughly twice what a month of delay at month two costs.

Companies running a structured 90-day review (a written check against the expectations set at hire, not a casual catch-up) recognised problems 2.1 months earlier and ended at a median total cost of $147,000 rather than $214,000. This is a saving of roughly a third for an intervention that costs an hour of a manager's time per hire.

A month of delay at month seven costs roughly twice what a month of delay at month two costs.

Section 2: The gap between knowing and acting

Why small teams should care most

Figure 3 shows the capacity effect by team size and it is sharply non-linear. On a team of five, a single mis-hire consumed 19% of engineering capacity over two quarters. On a team of fifty, 2.5%.

A large organisation can absorb a bad hire; the work gets redistributed and the quarter still lands. A twelve-person team cannot. The same absolute mistake becomes an existential one somewhere around the point where the team is small enough that everyone's work touches everyone else's.

This is the argument for small teams being more rigorous about hiring than large ones, which is the reverse of what usually happens. Small teams hire faster and looser because they are under more pressure and have less process. The economics say they are the ones who can least afford it.

What this implies about vetting spend

If a mis-hire costs $214,000 and a structured process reduces mis-hire rate by even a few points, the arithmetic on assessment spend is not close. At a 12% baseline mis-hire rate, roughly what we observe for unstructured processes, reducing that to 7% is worth about $10,700 per hire in expected value.

We have an obvious commercial interest in this conclusion, so treat it accordingly and run the numbers with your own baseline. The model, including the assumptions we are least confident about, is in the methodology below.

Table 1: Cost components with dispersion. Normalised to a twelve-person team and a $140k fully-loaded senior salary.