The Hidden Cost of Wrong Hires for Growth-Stage CTOs

Why bad hires are more damaging at the growth stage

Companies at early stages and late stages may occasionally survive bad hires more than growth stage teams:

At an early stage: everybody is survival mode. Misfit is uncomfortable, but limited number and cramped cooperation reveals problems soon. You can course-correct fast.

Late stage: It is more process, redundancy and culture. Single poor hires are less likely to cause harm in a system (but not completely inaccessible).

Growth-stage: You are expanding at a rapid rate, establishing new teams, developing more management layers and establishing systems. Any employee is a multiplier – either good or bad.

At this stage, each person:

Leaves a lasting effect on architecture.

Influences culture standards (how code reviews are run, how individuals handle incidents, how feedback is given)

Establishes precedents among the 5-10 subsequent hires (We have previously hired this level, and it will do well enough)

The implication of that is a poor fit is not a single non-performing individual, it is an area of misfit.

The apparent expenses: what you find in your budget

We can begin with the most obvious, easier to be recorded in books, expenses of a bad recruit.

Recruitment costs

To get a mid-to-senior technical position, you are likely to spend on:

• Recruiter/headhunter, fees inside the company.
• Job ads and platforms
• Time spent in screening, interviewing, debriefs engineering.
• How long have you worked at CTO doing final rounds?

When a wrong hire (or dismissal) in the first 6-12 months leaves, then you will incur those costs almost at once to replace the wrong hire.

Compensation and severance

You’ve paid:

• Base salary
• Perquisites, incentives, stock options.
• Onboarding and training expenses.
• Probably severance in case you leave.

Although the hire was not performing well, you have still paid the full or even close to full market rate at that time.

Overhead on tooling and onboarding.

Each new top engineer or boss:

• Installed with equipment, licenses, and tools.
• Initiates onboarding programs, buddy systems and training.
• Usually takes a lot of time to be ramped up by the senior engineers.

Repeat this twice on the same position in the same year and you will have then invested twice in onboarding–with little to show.

These charges are enough to increase to tens of thousands of dollars. These however are the most inexpensive aspects of a wrong hire.

The hidden expenses: where the harm is done

The actual threat is what is not shown directly on a P&L, but that strikes productivity, culture and future decision-making.

Lost engineering velocity

An incorrect recruitment does not merely provide lesser contribution; he frequently slows down others:

• The old engineers take time to scrutinise and re-write their code.
• Features are re-scoped by product managers due to the uncertainty of delivery.
• Quality is not always constant, that is why you postpone launches.

Your blood at the growth stage is velocity. At the cost of months of effective team output reduced by even 10-20 percent by one critical employee hire, then that is a big drag.

Long tailed architectural debt.

The mis-hires in the senior positions or the top positions are especially dangerous since:

• They can come up with systems that are not scalable or maintainable.
• They may over or under-engineer important parts.
• They are able to drive technology decisions on a comfort, rather than a fit to the company basis.

This debt may not come at once to you. but half a year or half a year later you shall see:

• Reduced development of features due to brittle systems.
• Hard to get hired due to stacking that is not standard.
• Higher incidence and fire fighting.

You are now paying compound interest on the bad technical judgment of some one.

Culture drift and demoralization.

It is famous that Peter Drucker said: Culture eats strategy for breakfast.

Their technical strategy may be the best in the universe, but the wrong hire may in the silence of things sabotage the culture that may help it work.

They might:

• Belittle other people by accusing them behind the back.
• Reduce the quality standard (We do not have time to test)
• Friction product and engineering
• Gossip or generate tension between product and engineering.
• Disrespect junior engineers or non technical teams.

What happens next?

• A-players are frustrated and unprotected.
• High performers begin looking after other opportunities.
• New employees read through this attitude and normalize it.

It is not only that you lose productivity, but you run a risk of losing people whom you cannot afford to lose.

Decision fatigue and the distraction of leadership.

There are only a limited number of quality decisions that you can make, on a weekly basis, as CTO.

The cost of a mis- hire occupies that:

• You waste time in determining performance problems.
• You conduct strenuous 1:1 conversations and coaching.
• You are an intervening party to them and the team.
• You rewrite or supervise rework of their shipments.

Each hour that you devote to this is an hour that you do not devote to:

• Strategic technical bets
• Futurization of architecture.
• Recruiting and developing skilled employees.
• Collaboration with the product leadership and the CEO.

This is a tremendous opportunity cost–and is hardly ever did the reckoning on.

Investor and candidate reputation risk.

Should a misplaced job applicant be given a visible job (e.g. VP Engineering, Head of Platform, Lead Architect):

• People decisions may make investors inquire about your judgment.
• Backchannel references might give future candidates a mixed impression about engineering.
• During due diligence, you may be required to discuss the churn in the organization.

Narrative is significant at the stage of growth. The departure of key positions or the apparent wrong hires may issue some red flags: “Will this team be able to scale?

An example cost model: putting dollars to the suffering.

To follow a simplified example, we shall proceed.

Suppose you are a CTO in the growth stage, and you need to hire a senior backend engineer.

Base salary: $120,000

Annual cost (with benefits, taxes, etc.): approximate of $160,000.

Service 9 months before departure.

Direct costs (approximate)

Salary for 9 months: $90,000

Then there are the benefits and overhead costs (pro-rated): approximately, 30,000.

Recruitment and interview time: estimate it at $15000 20000 equivalent.

Onboarding cost (compared to other engineers): perhaps$10,000 in productivity.

Already you’re at roughly $135,000-$150,000.

Indirect cost (conservative estimate)

Let’s say:

They were performing at about half of the rate required of a senior engineer.

They led to sufficient rework and delays such that your team essentially lost another 1-2 engineer-months.

The loss in productivity might be:

Missing 6-9 months of output of senior engineers.

And a month or two of redoing and scheduling time diffused throughout.

Practically, you can just as easily spend more than 2-3x their salary in the total cost after all has been added up.

And this is only one bad hire.

What is the cause of wrong hires (particularly in growth-mode)?

Considering this is such an expensive cost of wrong hires, how can they continue to occur? Among growth-stage CTOs, there are some patterns that emerge recurrently.

Speed over rigor

You’re under pressure to:

• Hit roadmap commitments
• Justify new funding rounds
• Minimize bus considerations in critical systems.
• You hurry up the process of hiring:
• Fewer interview loops
• Abated technical evaluation.

They had been employed in a large company, they cannot be bad.

In the short run, it is as though you are de-thrombosing growth. In the long term, you have just made it more likely that you are making an expensive mis-hire.

Role and company stage misalignment.

Candidates are starting to be nice… but not where you are.

Common misalignments:

• Veterans of big companies who are accustomed to much process, big teams, and clear demarcations – but you require practical builders.
• Exceptional single personalities that are advanced to leadership positions that they neither desire nor are prepared to undertake.
• The generalists recruited firstly into service in positions which are now more specialized and deep than broad.

Having a mismatch of stage and expectations makes both parties lose.

“Lost in translation” or mobile role definitions.

If the role is defined as:

We require a powerful senior engineer to assist us to scale.

…that’s not a role; it’s a wish.

There is no clarity in expectations concerning:

• Outcomes
• Ownership areas
• Technical scope
• Collaboration patterns

you will find yourself employing a person who is good at this or that aspect–but not that which you really want.

Over-indicating on likeability or vibes.

Culture fit matters. But in other cases, vibe checks turn to be an analog of:

• The common background or work experience.
• Same school, same companies, same tech stack.
• I can relate to them because I was the same age.

This can lead to:

• Monolithic teams lacking in essential skills.
• Ignoring warning signs in judgment or(teamwork).
• Underestimating technical level or problem-solving skill.
• Likeability is an added advantage and not a recruitment tactic.

Red flags: how to detect a bad hire in a short time

There is no better way to protect against the entire expense of making a mis-hire than by noticing it when it is early.

The following are the patterns to follow during the initial 60-90 days:

Execution red flags

Underestimates or overestimates tasks several times.

Require simple requirements to be repeatedly clarified and put in context.

Difficult to adopt the codebase / tooling that is already present.

Attempts to re-write most of the system without knowing the limitations.

Cooperation and communication problems.

Often does not match with product or design.

Does not do code reviews or provides non-constructive feedback.

Brings conflict in standups and planning meetings.

A talker and does not sell tickets or deliverables.

Ownership gaps

Attributes fault to outside forces (infra is bad, requirements were not clear).

Eschews responsibility of incidences or output problems.

Does not proactively mark risks or concern.

Culture mismatches

Rude to current practices (All you are doing is wrong)

Unemotional to criticism and easy to anger.

Makes a first-class citizen out of some roles (QA, design, ops).

Any of these could be coachable. The fact that they are staying longer than the first onboarding session is a good indication that this is not the right hire to your team.

One of the ways of hiring before it is too late

You cannot get this risk to zero but you can reduce it dramatically.

Begin with a clear and result-oriented job description.

Provide definition of role based on what is successful in 6-12 months, not responsibilities.

For example:

Own the key to reliability and scalability of our payments system to handle 3x traffic.

“Head a group of 5 engineers to develop our new partner platform.

Reduce the average time of incident resolution by 40 percent and establish SRE practices.

This clarity helps you:

• Write more accurate job descriptions.
• Ask more effective interview questions.
• Assess applicants with specific results.

Use structured and repeatable interviews.

Do not use strictly ad-hoc interviews. Instead:

• Establish job competencies (e.g. system design, coding, communication, leadership)
• Give every interviewer a competency to specialize in.
• Adopt standard questions and rubrics.
• Record verbal feedback preceding the debriefs in order to minimize bias.

Formal procedures may be oppressive initially, yet they immensely enhance the quality of signals.

Test: The way they think and the way they work.

To get senior technical positions, merge:

• System design interviews: Learn how they design scalable resilient systems.
• Practical coding exercises: It is preferable to have problems related to your area of expertise, not necessarily algorithm puzzles.
• Collaboration activities: Pair-programming, a design review, or incident postmortem walk through.

It is not merely checking whether they are able to solve problems, but how, how they do it, the trade-offs, and feedback.

Backchannel, however, do references well.

Other than posing generalized questions of Are they good? questions, ask:

• Which kind of an environment did they perform best in?
• What was the typology of the team that worked well with them?
• Hypothetically, had you to re-hires them, what would be the position you would assign them?
• What do we know that will make them successful should we employ them?

You go out gossip-hunting–you go out checking stage fit and role fit.

Get values and culture clear in action.

If you say you value:

• Ownership
• Humility
• Learning
• Collaboration

then formulate questions, which show these characteristics. For example:

Describe when a system you owned failed. What did you do?”

Write about an incident involving a severe technical dispute. How was it resolved?”

You are testing accountability, ego and their functioning under stress.

What constitutes to be done when you come to know that you have employed the wrong candidate?

Mis-hires will still occur even in the case of a powerful process. How you react fast and justly is what is important.

Eliminate indistinct discomfort by explicit diagnosis.

List current problems, basing on observable behaviors:

• Frequently fails to meet the agreed deadlines without actively communicating.
• Refuses to engage in code reviews even after being reminded about it several times.
• Does not record changes and as a result have knowledge silos.

Avoid:

• “They’re not senior enough”
• “The team doesn’t like them”

They are conclusions and not data.

Be clear, timely and written.

Hold a face-to-face, respectful discussion:

• Give some concrete examples of what is not working.
• Make expectations and definition of what improvement is clear.
• Decide on a specific deadline to review (e.g., 4-6 weeks)
• Write follow up to avoid confusion.

This is just to the employee and your team.

Support improvement–but do not drag it on forever.

Offer:

• Mentorship and pairing
• More frequent check-ins
• Availability of resources or training.

However, when it becomes evident that the disconnect lies in the fundamental (e.g. role incompatibility or value mismatch) then adding more time to the timeline generally is not in everyone’s best interest.

When it’s time to part ways

In case you realize it is not the right fit:

• Act with authority but should be respectful.
• Provide the softest landing possible (some examples of correct positions, severance where feasible)
• Act honestly (not telling too much) with the team.
• The humane way out would be much more preferable to months of silent resentment and distrust in the team.
• Insuring against the fallout of your A-players.

The impact of wrong hires to your best people is one of the most destructive.

If top performers see:

• Poor performers loitering without punishment.
• Toxic conduct condoned by the reason we are busy.
• Their feedback ignored
• they will find that standards do not exist–and they will also go.

Protect them by:

• Paying attention when senior engineers are expressing hiring or performance objections.
• It is important to show that you do take action on serious matters.
• Punishing behavior and performance you desire publicly.
• It has been said by Steve Jobs once: A small group of A+ players can circle a giant group of B and C players.

As CTO, you have to ensure that you do not lose such players of A+ caliber by the mere fact that someone made a few misguided hires.

Developing a hiring system to grow with you

To eliminate the same mistakes as you scale, even the hiring process should be a designed and improved system.

Establish and keep a well-defined hiring bar.

Note down what good will represent at each level.

Test interviewers on a regular basis using model profiles and situations.

Do not set the bar high by desperation–stretch the search towards the direction of the search.

Monitor some important hiring measures.

You do not need everything an analytics dashboard, though:

Time to fill key roles

Pass-through rates at every interview stage.

Post 6-12 months performance of new employees.

Late attrition rates and causes.

This will make you know whether your process is either too generous or too strict or it is not focused.

Invest in the training of interviewers.

There is no guarantee that good engineers make good interviewers.

Teach them:

The technique of open-ended and behavior-based questions.

How to prevent leading candidates or foaming at the mouth.

The estimation of responses with the help of a rubric, as opposed to a sense of gut.

This can be considered one of the best ROI investments you can make as a growth-level CTO.

Develop hiring to reality feedback.

Periodically check the performance of new employees.

Modify your interviewing process depending on what you get to know.

In case high levels of hires have ownership issues – add ownership tests

In case the system design is a problem to a lot of them – reinforce that aspect of the process.

Hiring is not a policy but a learning process.

The thinking of the CTO: Major league seats to building a team.

Finally, wrong hires are not an issue to do with hiring per se; it is a leadership issue.

As CTO, you have to change your attitude to:

That is, how quickly can we fill these vacancies?

What do we really mean by creating the type of team we are willingly shaping? Who do we need (or not need) to be there?

That means:

Almost saying no to good candidates, not necessarily the right candidates, more frequently.

Comfortable with temporary discomfort (leaner group, slower delivery) in order to prevent dysfunction in the long term.

Preserving your culture as hard as you preserve your architecture.

There comes a harsh reality of at growth stage:

Being a short one great engineer is nearly always superior to being a heavy one wrong hire.

Bringing it all together

Let’s recap the key ideas:

An incorrect hire is much more expensive than his salary: he will slow down velocity, quality, morale, and even your personal bandwidth of decisions.

Growth-stage CTOs feel particularly vulnerable, as every person is influenced by hires to have impacts on architecture, culture and expectation of further hires.

It is very easy to agree that the real cost of a mis-hire is 2-3 times the amount that they paid that individual in a single year when you take into consideration lost productivity, re-work, and distraction of the leadership.

The majority of mis-hires are as a result of hastiness in the process, lack of clarity of their roles, mis-alignment of stages and too much reliance on vibes in place of unambiguous competencies.

One of the ways of minimizing the risk is by narrowing down the roles, conducting structured interviews, assessing practical skills, and performing specific reference checks.

Once you get to know that you have a flawed hire, the first step to take is to do it promptly, and fairly and by ensuring that you safeguard your A-players and the culture.

Hiring should be an engineering system: establish standards, measure results, train interviewers, and repeat forever.

Your codebase, infrastructure, and product strategy are all critical to a company such as TAV Tech Solutions (just like any other tech organization in the growth stage). Even more important is the personnel you introduce to create and expand those systems.

When you get hiring right, your architecture will get better, your culture will get stronger and your roadmap will speed up.

When you are wrong, it is expensive–and the cost is usually in the air until you find out that it is too late.

The good news? By carefully choosing and planning how you recruit, by having a clear understanding of the real expense of mis-hiring, you can make recruiting as one of your greatest competitive advantages.