Why Recruitment Fees Are Justified
Hiring the right leader for a company is one of the most critical decisions a business can make. The consequences of a bad hire can be catastrophic, leading to financial losses, operational inefficiencies, and a decline in employee morale. The case of a UK publicly listed company serves as a stark reminder of the high cost of a poor hiring decision. While some may balk at the fees charged by headhunters, the example of this publicly listed company demonstrates why investing in a thorough, professional recruitment process is not only justified but essential. Here are three reasons why:
1. The Financial Impact of a Bad Hire Can Be Devastating
When this publicly listed company appointed a new CEO in June 2019, the company’s stock price was 75p per share. Today, the price has plummeted to 26p per share—a staggering 65% decline. This drop in share price has had a profound impact on shareholders. For example, the company’s largest shareholder, who owns 13,924,595 shares, has seen the value of their investment fall from £10.44 million to £3.62 million—a loss of £6.82 million.
The financial decline didn’t stop at the stock price. In the year before the CEO’s appointment, this publicly listed company posted a net fee income (NFI) of £72.3 million and an operating profit of £10.3 million. By 2019, NFI had risen slightly to £74.5 million, but operating profit had dropped to £4.0 million. The CEO blamed the decline on previous management, but the problems only deepened. By 2024, the company’s half-year NFI was £25.3 million, with an operating loss of £3.6 million. The financial toll of a bad hire is clear: declining revenues, shrinking profits, and eroding shareholder value.
2. A Bad Hire Can Lead to a Loss of Talent and Organizational Instability
One of the most damaging consequences of a bad hire is the ripple effect it has on the rest of the organization. At this publicly listed company, the new CEO’s leadership led to the departure of key managers who had helped build the business. These individuals either resigned, were managed out, or were terminated. The loss of experienced talent created a leadership vacuum, further destabilizing the company.
In an attempt to turn things around, the CEO hired a new management team and restructured the business. However, these changes failed to halt the decline. When the COVID-19 pandemic hit, the CEO used it as a scapegoat for the company’s poor performance, masking deeper internal issues. Post-pandemic, the expected bounce-back never materialized. The CEO terminated the new management team, closed offices, and laid off employees. The cost of a bad hire isn’t just financial—it’s also human. Employees faced uncertainty about their job security, and many lost their livelihoods.
3. Strategic Missteps Can Cripple a Company’s Future
A bad hire can also lead to poor strategic decisions that have long-term consequences for the business. Under the CEO’s leadership, this publicly listed company announced the sale of all its operations outside the UK and America, except for one in India. This decision, framed as a “strategic” move, put hundreds of employees in a precarious position and signaled a retreat from global markets. The company’s inability to adapt and thrive under the CEO’s leadership has left it in a weakened position, struggling to compete in an increasingly challenging market.
The company’s repeated warnings of poor results and declining financial performance underscore the long-term damage caused by a bad hire. What began as a drop in operating profit has snowballed into a full-blown crisis, with the company’s very survival at stake.
Why Recruitment Fees Are Justified
The case of this publicly listed company highlights the immense cost of a bad hire—financial losses, talent drain, and strategic missteps that can cripple a company. While some may view recruitment fees as an unnecessary expense, the reality is that they are a small price to pay for ensuring the right leader is in place. Here’s why:
Expertise and Access to Top Talent: Headhunters have the expertise and networks to identify and attract top-tier candidates who may not be actively seeking new roles. This access is invaluable in finding leaders who can drive a company forward.
Thorough Vetting Process: Professional recruiters conduct rigorous assessments of candidates, including background checks, interviews, and reference checks. This reduces the risk of a bad hire and ensures the candidate is the right fit for the company’s culture and goals.
Long-Term ROI: While recruitment fees may seem high upfront, they pale in comparison to the cost of a bad hire. The right leader can transform a business, driving growth, innovation, and profitability. The investment in a thorough recruitment process pays dividends in the long run.
Conclusion
The story of this publicly listed company is a cautionary tale of what can happen when a company gets it wrong at the top. The financial losses, organizational instability, and strategic missteps caused by a bad hire have had far-reaching consequences for the business, its employees, and its shareholders. While recruitment fees may seem like a significant expense, they are a worthwhile investment in securing the right leadership. After all, the cost of a bad hire is far greater—and often irreversible.