No matter how rigorous organisations make their recruiting process, hiring mistakes still happen. But does a business realise the true cost of these mistakes?
Hiring the wrong candidate costs an eye watering $35,400 (based on average earnings in Australia) according to MRI Network. The cost for making a mistake on an executive is far higher. The costs are made up of all of several parts in the recruitment process and opportunity loss of finding the right employee.
Even if an organisation has done away with expensive press advertising, there are still hard costs involved in advertising online. The cost of ads appearing in different categories on the same job board can quickly add up. The recruiter may use multiple job boards and channels to advertise the vacancy. Large organisations may also advertise the job opening to staff internally. Posting the ads on external and internal websites takes time and money for an internal HR staff member and more if the organisation uses a recruitment agency.
Every CV and cover letter that is opened costs the organisation money including those that can be dismissed as junk applications. For the worthwhile ones, a recruiter identifies which applicants have the essential criteria and those that have desirable skills. They then decide which group to categorise them in. If the role is popular, an organisation may receive hundreds of quality applications that equate to days or weeks of reading.
Setting up and conducting the interviews is even more time consuming. Contacting applicants to arrange a suitable time and preparation of the interview questions takes time before the interviews even begin. Depending on the number of staff and recruitment agent staff involved, the cost of one interview can cost hundreds of dollars. MRI Network’s 2017 Recruiter Sentiment Study revealed that it took an average of three interviews with one applicant before recruiters made an offer.
A verbal offer can be made once the successful applicant is decided. According to the MRI Network study, one third of rejected job offers occur because the applicant has accepted another job, 25% reject based on the compensation and a further 15% took a counter offer. The negotiation process will cost the organisation time and money because it involves HR staff, senior managers and sometimes a recruitment agent.
Most new employees will undergo orientation and training. The cost of materials and trainer’s time all add to the costs. The organisation may use an existing star employee for onboarding or on-the-job training of a recruit, so productivity suffers. According to HBR, best performing employees are around four times as productive as average performers so while they aren’t working the organisation suffers.
If a recruit decides the role or the organisation isn’t for them or they don’t pass the probation period, the recruitment process begins again. More advertising and recruitment costs are incurred.
While the position remains unfilled, there is a drop in revenue or existing staff do extra work which has the potential for poor staff morale.
If you think the cost of a bad hire leaving the organisation is expensive, spare a thought for what it costs if they stay.
An employee’s disengagement can be contagious to everyone around them. A poor-performing staff member can spread their bad habits and poor attitude to their colleagues. There is also the opportunity loss where the organisation could have had a high-performing employee instead. In a different HBR report, 80% of a business’s profits are generated by 20% of its workers. Given enough time, a poor employee can have a negative effect on staff morale, turnover and the bottom line. Matchd uses a scientific approach of scoring applicants that not only reduces recruitment costs, but most importantly, helps you avoid a bad hire. Check out how Matchd can assist you today.