As the title of a recent SHRM blog post rightly puts it, “The Cost of a Bad Hire Can Be Astronomical.” A quarter of a million dollars — that’s the high side of the costs the Brandon Hall Group found it takes to repair the damage of a bad hiring decision.
Granted, not every example will cost that much. But according to the Brandon Hall Group, you need to consider the total impact turnover may have, including:
- Advertising and job posting costs
- Recruiter, hiring manager and other staff time
- Re-Training costs (not to mention lost training costs)
- Costs of outplacement services
- Litigation fees
And then, there are the indirect costs:
- The disruption to projects, sales or customer service
- Potential lost customers
- Employee morale, and the ripple effect of others “jumping ship”
- Weakened employer brand
So, it makes sense to invest in making better hiring decisions. But where do you start and how do you build your case for the investments you may need?
The real costs of recruitment
The SHRM post cites a CareerBuilder study that found one of the reasons bad hiring decisions are made are because organizations are “too often in a rush to fill a position. Recruiters can feel like they’re like the hamster on the wheel, constantly working on the next mission to meet new hiring demands. And, the need to fill some openings can be intense.
So, recruiters need solutions that can save them time, while improving candidate quality and decision-making. Some of the processes that are used to screen candidates can be incredibly labor intensive. Take reference checking, for example. In a new calculator we’ve developed, we show you how if you’re reference checking every candidate (and reaching two references for each) and let’s say you’re hiring 50 candidates a year, that adds up to 100 hours. Comparatively, if you switch to automated reference checking, it takes just two minutes per candidate, and you reach and average of four references (not to mention you typically get that information in less than 2 days!).
Calculate the value of your time spend on hiring tasks:
You’ll also want to consider all the other hiring tasks that are involved and add up those costs. If you total all of those hours across the total number of candidates you’re hiring each year, and then multiply by the average recruiter hourly salary, you’ll be amazed at what that time is worth. It may help you determine if there are services or solutions that can be a wise investment to get some of your precious time back.
Figure Out Your Gains
After you’re computed your total costs. It’s time to add up the gains you could make with a new solution. Just like when figuring out the costs, there are often benefits that are hidden. As SHRM is in New Orleans this year, we’ll use a term that is used in the bayou, called lagniappe. It means getting something extra – like the 13th or extra donut in a baker’s dozen. You’ll often find that there are extra benefits to many HR solutions you gain, beyond their original purpose. Here are just a few examples.
- Better Reports and Insights – By way of being online and data-driven, utilizing a tool such as online reference checking, you no longer have to rely on notes, or drafting summaries from memory. You can provide hiring managers with detailed candidate feedback reports (check out an example here), and even deliver candidate comparison reports, easily. Beyond the time-savings, think of the strategic capital you’re building for you and your team by being able to deliver professional, detailed and consistent insights.
- Deliver a Great Brand Experience – In today’s job marketplace, candidates are not interested in long drawn out applications, or falling into a black hole of lost communications during the hiring process. With an online reference solution, candidates have complete visibility into the process. They enter their references, and get alerts so they know who responds – the only thing they don’t see are the individual responses.
- Passive sourcing – Finally, one of the biggest benefits to online reference checking is being able to exponentially build a highly-targeted talent pool – or multiple talent-specific pools. With online reference checking, you can set automatic invitations to ask references if they’re interested in learning about opportunities at your organization, and you get their complete up to date contact info along with job background. You can even get candidate referrals. The value of building a pipeline like this is enormous.
There are also the intangible costs of improved compliance that online reference checking can bring, and the decrease in risk.
What is tangible? The SkillSurvey Analytics Team has undertaken validity studies following tens of thousands of employees’ status post-hire. The biggest gain of all? Organizations who have used SkillSurvey’s online reference checking have experienced lower first-year turnover for those employees by 35% percent.
Want to see how this math works with your own hiring processes? Use our ROI calculator and see how much you could gain.