First in HR: Know Your Numbers in Hiring

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By Ashley Lipman
Outreach Manager

Before making a hire, it is essential for hiring managers and human resources to crunch some numbers and understand the costs associated. Some costs will be fixed based on your business needs; others will be variable depending on who you choose to hire.

Employee turnover and replacement can cost the company upwards of nine months of the position’s salary. That means if Before making an offer, here are some numbers to calculate to better understand the expenses associated with the onboarding process.

Productivity Costs

If a position is unfilled, someone has to be covering the job in the meantime. That means that the individual is unable to focus all of their time on their usual task, which reduces productivity in both tasks. Reduced productivity can mean falling behind on work and making costly mistakes, due to a lack of focus.

Conversely, the longer it goes on, the higher the risk that the cover person will become burnt out and need to take time off, increasing the issue. Then you get reduced engagement from the other employees, who fixate of the negativity associated with turnover. This is the main reason you want to ensure you fill the position as quickly as possible and have an accurate measurement of Time being dedicated to each job.

Training and Onboarding

The work doesn’t end the moment someone is hired. The new hire must go through training and orientation before they can dive into their work. This often requires attention from other individuals within the organization who must limit the focus on their responsibilities to train the new hire.

Once training and onboarding are complete, it will take time for the new employee to become comfortable in their role to work efficiently and without assistance from others. While this is a positive shift away from the black hole that is an unfilled position, there are still cost implications of being behind.

The Hiring Process

Aside from the opportunity costs of not having someone in place, there are also the costs of finding and hiring someone to consider. Here are a few factors that impact the cost of hiring someone new:

  • Posting the job – posting the job on job boards or advertisements cost money. Depending on the publication or source, the number can fluctuate substantially. This can range anywhere from around $40 to $500.
  • Working with a recruiter – if you work with a recruiter to fill the job quickly or hire someone for a specialized position, you can expect to pay a significant amount of money. Some recruiters work on a percentage of the position’s salary, hourly, or a flat rate.
  • Selection process – if you are managing the hiring process within the organization, you can attach hourly rates to everyone involved with screening, interviewing, reference checks, second interviews, etc. Usually, HR spearheads the process with the department head co-chairing the interviews and selections.
The Cost of a Bad Hire

Sometimes, despite your best efforts, you hire the wrong person. This can happen for a number of reasons, including but not limited to:

  • Rushing to fill the position quickly
  • Not checking references
  • Poor skills match
  • Values don’t align with the organizational culture
  • Low skill intelligence

According to the U.S Department of Labor, the cost of a bad hire can be around 30% of the individual’s annual salary. Other research organizations have stated various numbers, none of which outline a hit a business wants to take.

Hiring the Right Person

The best way to ensure you won’t incur inflated turnover costs is to make sure you hire the right person. During the hiring process, listen to your instincts. If something seems off, don’t select that candidate. Check references and administer skills and personality tests to assess their competence and ability to fit with your organizational culture. Then, work to ensure your employees are happy so that they don’t want to leave.

Ashley is a super-connector who helps businesses find their audience online through outreach, partnerships, and networking. She frequently writes about the latest advancements in digital marketing and focuses her efforts on developing customized blogger outreach plans depending on the industry and competition.

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