A costed breakdown. The number is bigger than most boards expect — and it's the strongest case for doing senior recruitment properly.
Most not-for-profit boards underestimate the cost of a senior mis-hire. They look at the recruitment fee, the salary, and the notice period, and conclude getting it wrong costs maybe $50,000. Manageable. Worth taking a chance on a cheaper recruitment approach.
The actual cost is far higher. A real-world example.
The scenario
A 50-person not-for-profit hires a Head of People and Culture. Salary $160,000 base, plus super and benefits — total package around $185,000. The hire turns out to be wrong. Performance issues are clear at six months. The person is exited at month nine.
This is what that costs.
1. Direct recruitment costs (round one)
- Recruitment fee paid on placement (contingent, ~18 percent): $28,800
- Internal time on shortlisting, interviewing, reference checks (CEO and Board across 8 to 10 weeks): conservatively $8,000 to $12,000
- Advertising and any direct sourcing costs: $1,500
Subtotal: approximately $40,000.
2. Salary and on-costs during nine months in seat
- Salary paid: $120,000 (9 months of $160k)
- Super at 12 percent: $14,400
- Payroll tax, workcover, leave accrual: approximately $13,000
Subtotal: approximately $147,000.
You'd have paid this for any Head of P&C in the role. But because the appointment was wrong, the productivity return on it is significantly diminished, and negative if the person caused active harm.
3. The hidden costs while they're in seat
This is the bit most boards don't see until afterwards.
- Time CEO spends managing the underperformer: 4 to 6 hours a week for the final 3 to 4 months. At a CEO day rate of around $1,000, that's $24,000 to $40,000 in opportunity cost.
- Time direct reports and HR team spend dealing with the fallout: hours not spent on their actual roles, projects delayed, support roles stalled. Conservatively $15,000 to $25,000.
- Stalled or poorly executed strategic initiatives — EA negotiation, restructure, capability uplift, culture work — that the Head of P&C should have driven. Hard to cost precisely, but easily $30,000 to $80,000 in delayed value or rework.
Subtotal: approximately $70,000 to $145,000.
4. Cultural and team damage
This is the cost that doesn't appear on any spreadsheet but is often the largest.
- Trust erosion in the People function. The HR team loses confidence in leadership, and may begin to disengage or look elsewhere. If one person resigns as a result, you're looking at $20,000 to $40,000 to replace them and rebuild capability.
- Manager dissatisfaction. If managers across the organisation lose faith in the P&C function during this period, the next Head of P&C faces a harder job restoring credibility. Add 3 to 6 months of slower onboarding for the next hire.
- Staff engagement impact. A poorly performing senior leader directly affects how supported the broader team feels. Even a small drop in engagement across 50 people, applied to productivity, costs real money.
Subtotal: conservatively $40,000 to $100,000.
5. Exit costs
- Notice period payout (4 to 8 weeks): $12,000 to $25,000
- Annual leave payout: typically $6,000 to $10,000
- Legal advice on the exit (especially if performance management was lacking): $3,000 to $8,000
- Potential settlement to avoid claims: $0 to $30,000+
Subtotal: approximately $20,000 to $70,000.
6. Replacement recruitment (round two)
- Second recruitment fee: $28,000 to $50,000 (often higher this time, because the board now wants retained search)
- Internal time, this time more thorough: $12,000 to $18,000
- Interim cover during the gap (3 to 6 months between roles): $40,000 to $80,000 in contractor day rates
Subtotal: approximately $80,000 to $150,000.
7. Ramp-up of the replacement
The new Head of P&C needs 3 to 6 months to come up to full effectiveness — longer if they're inheriting a damaged team and dispirited managers.
- Salary during ramp-up at sub-optimal productivity: opportunity cost of $40,000 to $80,000
- Cultural repair work: difficult to cost, but expect 6 months of focused remediation
Subtotal: approximately $40,000 to $80,000.
Adding it up
And remember, this is for a $160,000 role. The mis-hire cost is between 2.7 and 4.5 times annual salary.
That's consistent with what credible research on senior mis-hires has shown for years. The Society for Human Resource Management estimates the cost of replacing an employee at 50 to 200 percent of annual salary across the workforce — and for senior executive roles specifically, the Center for American Progress and other research bodies put it materially higher, up to 213 percent or more (some studies cite 3 to 5 times annual compensation for executive-level mis-hires). Boards consistently underestimate it.
What this means for how you recruit
The argument for proper recruitment isn't "retained search costs more, but it's worth it." The argument is: the fee differential between a contingent and a retained search on this role is about $25,000. The cost of a mis-hire is $400,000 to $700,000.
The economics aren't close. They're not even in the same conversation.
Three things that meaningfully reduce mis-hire risk
- Proper market mapping. The right person for the role isn't necessarily the one who responded to the ad. They're often someone who needed to be approached. That requires time and methodology that contingent doesn't fund.
- Rigorous assessment. Two interviews and reference checks of the candidate's chosen referees is not enough at this level. You need structured behavioural assessment, deeper referencing, and honest probing of capability gaps.
- Cultural calibration upfront. Before any candidate is shortlisted, the recruiter needs a clear picture of your culture, your leadership style, your team dynamics, and what fit looks like in practice. This is the conversation contingent recruiters often skip.
Getting senior hires right is one of the highest-leverage things a CEO and Board can do. Getting them wrong is one of the most expensive.
Sources
- SHRM — Total Cost of Hiring & Replacement Benchmarks (replacement cost of 50–200% of annual salary)
- Center for American Progress — There Are Significant Business Costs to Replacing Employees (executive replacement up to 213% of salary)
- Harvard Business Review — research on senior leadership turnover and mis-hire impact
- Patterson Recruitment placement experience across the not-for-profit, aged care, and disability sectors
Concerned about getting a senior hire right? Patterson Recruitment runs retained executive search across not-for-profit, aged care, NDIS, and education — with proper market mapping, rigorous assessment, and honest cultural calibration. Book a confidential briefing with Gab or call 0416 170 100.
This article is current as at May 2026. Cost ranges are illustrative based on Patterson Recruitment's market observations and are intended as a directional guide for Boards and CEOs assessing recruitment options.
