The cost of a failed account executive hire is about 8 months of lost productivity. A three month initial search, three months of ramp time, the termination, and then another two to three months of ramp for their replacement.
That’s at the individual contributor level.
What does it cost the organization to hire the wrong executive? In terms of time cost to the startup, a failed executive hire is roughly similar, 9 months. But knock-on effects hinder the organization.
First, there’s the execution delay to a company. When a company hires an executive, the business hires the executive’s network. Great executives will staff a team quickly. Because that team often shares work history, the success rate of that team is higher than average.
The converse is also true. Executives with weak networks burn time to build their teams. Without a strong network, those executives' success rate in building their team will asymptote to the average. Hiring takes longer and is less fruitful.
The second knock-on effect is attrition. Letting go of the wrong leader often means rebuilding their team under new management. Attrition challenges the culture of an organization, the perception of momentum, the motivation of surrounding teams. Most companies observe about 15% attrition annually. Those without the right leaders observe significantly more.
The third impact is damage to the employer brand. That’s a reason the Redpoint SaaS metrics template includes Glassdoor score. In a slight revision, some companies added Glassdoor page views, a proxy for candidate interest in a company. The better the management hires for a business, the greater candidates' interest to work for a company. Often, employee satisfaction follows (also a metric in the template).
These figures translate into candidate close rates and candidate cycle length. The greater the demand to work at a company, the faster teams staff roles with stronger candidates.
In addition to the lost time and execution of a failed executive hire, employee churn increases, employee tarnishes, and overall employee satisfaction suffers. Startups that pick the right leaders to build their company benefit from a competitive advantage for all these reasons.
Startups should expect successful management hires about 75% of the time. However, some executive teams observe very little turnover. Looker was one of those examples. The management team at the time of the sale to Google collaborated for 5 years without turnover. Of course, the team grew as the business did.
Regardless, the shared culture and consistency of the team was a strength for the business, and ultimately a competitive advantage in execution time, culture, and employee brand.