Investing in the right people is often less expensive than the hidden costs of hiring mistakes.

Success is powered by people. Every loan funded, process streamlined, and relationship managed ties back to the talent working behind the scenes. When you manage hiring correctly, everything else falls into place.

When it’s done wrong? The costs run far deeper than most companies realize.

Let’s take a look at the hidden costs of hiring gone wrong—and why investing in the right people is often far less expensive than you think.

The Real Cost of a Bad Hire

Hiring mistakes aren’t just frustrating. They’re expensive. A bad hire can lead to missed deadlines, poor execution, compliance issues, or customer churn—all of which affect your bottom line. In some cases, the wrong hire in a leadership or operational role can stall momentum across multiple departments.

Worse, it can cost you your best people. When top producers identify dysfunction in operations, credit, or servicing, they are more apt to leave. They won’t stick around if they feel like they’re doing battle alone, or when poor support jeopardizes their relationships.

According to SHRM’s “The Cost of a Bad Hire Can Be Astronomical,” the cost of a bad hire can reach up to five times their annual salary when you account for direct costs (e.g., salary and severance), indirect costs (e.g., lost productivity), and the time required to hire and train a replacement.

The Trap of Short-Term Thinking

Private lenders often hesitate when it comes to paying top-tier talent, especially for nonrevenue roles. There is a tendency to view hiring as an expense rather than an investment in infrastructure.

Here’s the reality: Hiring someone for $30,000 less today might cost you millions in the long run. A lower-salaried hire who lacks experience, strategic capability, or leadership instincts may hinder your team’s progress or fail to enhance your systems. That drag compounds over time.

Take for example, a private lender who had a choice between two candidates to lead their post-closing function. One was an experienced leader asking for $150,000 plus bonus, while the other was a lower-level manager asking $100,000. Despite no budget limitations, the lender selected the lower-cost option. Within four months, the post-closing team had unraveled—processes weren’t being followed, loans were stalling, and team morale had collapsed.

Eventually, the manager and the team had to be replaced. When the company brought in a consultant to assess the damage, the recommended solution was nearly identical to the plan the $150,000 candidate had proposed months earlier.

Top performers don’t just cost more; they deliver more. When the market tightens, they’re the ones who fill pipelines, protect your investor relationships, and create efficiencies that scale.

When “Almost Right” Is Dead Wrong

Another mistake? Trying to stretch a mid-level hire into an executive seat. Maybe they’ve been a strong underwriter or operations manager, and the company wants to promote from within. Authentic leadership requires a distinct set of skills, however.

Hiring someone who’s “almost right” may feel like a safe bet, but it’s often more damaging than waiting for the right person.

Misaligned leaders can slow decision-making, fail to inspire their teams, and frequently end up micromanaging because they lack confidence at the strategic level.

One private lender promoted a top-producing loan officer to a producing regional sales manager role, hoping their production instincts would translate into leadership. The new manager focused more on personal production than on removing roadblocks for the team, and morale dropped sharply. Within months, team performance declined, and they lost key loan officers to competitors. The takeaway: Top producers need coaching and support, not competition from their boss.

Compensation Mindset

If you’re still viewing compensation through a “how low can we go” lens, you’re missing the point. A company should consider its impact, not just its cost.

Great leaders build culture, attract talent, and fix broken systems. They protect margin by creating efficiencies, avoiding regulatory missteps, and improving execution. These aren’t line items—they’re force multipliers.

According to McKinsey, high performers are 400% more productive than average employees, and in complex occupations, that number can climb to 800%.  This isn’t a result of working harder—it’s the result of working smarter.

Think about it: Would you rather save $20,000 on your base salary or generate an extra $5 million in funded volume because your team runs more smoothly and efficiently?

You don’t pay qualified talent more because it looks good on a comp report. You pay them more because they make your business better.

Stop Hiring for the Middle

Too often, companies approach hiring with a rigid compensation range in mind and then attempt to find the best available candidate who fits within it. But here’s the truth: When you lock yourself into a salary range, you’re also limiting yourself to the level of talent that’s currently earning it. You’re not hiring for what your company needs; you’re hiring for what you’re willing to pay.

In the private lending space, where roles are nuanced and stakes are high, this approach can seriously limit your upside. If you want a leader who can design systems, scale teams, or rework credit policy to unlock profitability, you need to build your compensation plan around that caliber of impact.

The goal isn’t to overpay; it’s to align compensation with the value the right candidate will deliver. That might mean stretching beyond your initial range, but it also means hiring a candidate who can hit the ground running, motivate your staff, and build a lasting infrastructure.

Set the bar based on outcomes, not averages. Don’t shop for leadership in the middle of the market if you’re trying to build an elite operation.

Build for the Long-Term

The best lenders don’t build teams to fill gaps. They hire with purpose, not just managing headcount but considering talent acquisition a crucial part of strategic planning.

That means budgeting for the leaders you need before you’re desperate for them. You can create scorecards for roles to ensure you hire based on competencies, not personalities. Prioritize talent as infrastructure.

When entering a new channel, such as wholesale lending, many lenders feel they need to hit the ground running by hiring a producing manager to generate volume. Although a small test volume helps evaluate early traction, it can be equally important to hire a channel leader who can validate the business plan, understand market intricacies, and develop a strategic growth road map. The right leader can identify pitfalls before they become issues, and scale methodically, starting small if needed, and growing sustainably in any market.

In a market as competitive as private lending, the difference between growth and stagnation often comes down to who’s sitting at the table.

Hiring qualified talent isn’t cheap. However, hiring the wrong person is far more expensive. Now’s the time to take stock of your leadership team and hiring.