Whether it’s for a start-up and this is employee number one or if there is a requirement for employing vast numbers of people an organization will always have direct costs relating to hiring and will decide whether to pay for advertising, marketing, career portal, external recruitment services or headhunting fees, assessment tests, visa’s etc etc.
The choice is there for an organization to spend as much or as little on these direct costs as they wish… but how little is too little?
It’s practically impossible to get it exactly right when hiring a person (or people) but investing time and money in developing sufficient process and procedures will increase the chance of hiring the best people in terms of cultural fit as well as ability and experience.
Finding a good balance between the cost of hiring the right people versus the cost of getting it wrong isn’t easy but when you take the time to really consider the hidden costs of making a hiring mistake then investing more time and money up front becomes a very worthwhile and necessary investment.
Hidden cost factors of a bad hiring decision;
- Time spent hiring a replacement
- Reduced morale of other team members
- Disruption to clients
- Investment in on the job training (internal and external)
- Time taken from exit of previous hire to the replacement person reaching minimum standards to perform the job
- Loss of confidential information
- Damage to company brand
- Additional work load for other employees
The list goes on and many are interlinked, but the actual cost of an employee leaving is not easily quantified as there are just so many additional factors to be considered, for example a key employee with a very specific skillset will have a greater impact when leaving an organization than that of someone in a role which is easily replicated. Smaller businesses will also be more affected by one person leaving than larger businesses.
I guess the best advice is don’t cut corners and always think about what could be the cost of getting it wrong.
How does your organization calculate the cost of replacing an experienced employee?
I look forward to reading your comments.
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Posted in: Talent Acquisition