I realized that there’s another hidden cost to hiring bad people that shows up when they’re forced out: they give a company a bad name. I hadn’t thought much about this until today, but it’s true: my opinion of a set of companies is colored greatly by the people I know from work who’ve left that company.

Say your employer hires a couple people from Company X over a few months, and they’re all competent but the most inconsiderate jerks: they insult people in meetings, spend much of their time forming little conspiracies, and in general act badly. That’s absolutely going to affect your opinion of that company — even if they were forced out of that company for not being good fits.

This makes for a particularly weird phenomena. Consider a dying company with a large, reasonably competent IT department.
Healthy: normal flow of people out of the company.
Early signs of decay: increasingly more of the best people leave. The outside perception is that employees leaving the company are unusually good.
Getting sicker: more and more of the good people take off. They join other companies and help bring other good people on. This company may not be viewed as a goldmine of potential high-quality employees
Needs hospitalization: employees of all stripes are leaving voluntarily and being laid off or forced to leave. These quality of leaving employee drops in general, and so does the opinion of those leaving it.
Deathbed: all the last rats who couldn’t get a job gnawing on any other corpse swim to the job marketplace. No wonder the company went under, if that’s the kind of person they had working for them.

This is another reason why it’s so important to be super-selective in hiring. Even if you’ve got an unusually frisky HR department that’s good at forcing people out when a bad hire gets in, those bad hires then carry your company’s name at the top of their resume when they start pounding the pavement, and you get a reputation. Then when you want to get a new job, you may find that the market’s prejudiced against you, so if only for selfish reasons you should look out for this possibility.