Past discussions between the Human Resources Manager and their Abel Personnel representative, Addeline, occasionally focused on the true cost of hiring, and why an outside recruiter may be most cost-effective. Addeline’s reasoning for using a staffing and recruiting firm such as Abel Personnel typically touched on six areas:
Cost of Hiring
| 1 | In-house Recruiter Salary & Benefits:Typically, the in-house recruiter either has no openings to fill or is inundated with personnel requisitions (feast or famine). In the former case, there is not a demonstrated full-time need for an internal recruiter. In the latter case, the capacity of a single recruiter might further delay the number of days to have multiple positions filled (see below). |
| 2 | Access to Applicant Database:Abel’s database already has numerous candidates for a wide range of positions. A single in-house recruiter would likely not have built that resource. Online resources are an option for both in-house and third party recruiters, but there is also a pool of applicants that do not engage with social media for job searches, preferring to have a trusted recruiter “keep them in mind.” The outside recruiter has also identified current applicants that would not be a good fit based on previous screening, information the in-house recruiter would not have. |
| 3 | Associated Costs: The cost of preparing and posting openings, and fees to job listing services can be considerable. Creating a job posting that attracts the right candidates, posting the position, reviewing resumes including those who do not quality are time and energy consuming. The postings may not even produce results consuming time and money. |
| 4 | Lost Revenue: Often the most overlooked expense, the difference between the two approaches in how many days required to fill the position, means that the revenue from that position is lost and/or that others covering for the opening are not doing their own job well and are subject to burnout. There is an impact on productivity and an emotional strain. The depth of resources of an outside recruiter will almost always result in a quicker hire. |
| 5 | Lost Management Time: If there is no in-house recruiter, managers may need to screen all resumes, schedule interviews and generally be the in-house recruiter, diverting attention from other managerial duties. |
| 6 | No cost until a hire is made: The hiring company does not have any cost, if Abel does not provide a candidate they want to hire. The sourcing, posting, resume reviewing, initial interviews are completed by Abel. The firm only looks at select, screened candidates who fit the company, the location and the pay range. Significant time, energy and money are saved. |
More information about calculating the standard cost per hire can be found here. Benchmark estimates of the cost of recruiting range up to 3x annual salary. This calculation depends in part on how many hours are devoted by how many people doing interviews, direct cost to bring the applicant in for an interview, screening, etc.
Cost of a Bad Hire
This time, Addeline offered a different consideration: what is the cost of a bad hire? She then suggested the following hard and soft cost impacts:
| 1 | Lost Hiring Costs:Often the expenses to make the hire must be written off. The second choice for the position may be no longer available once the first choice proves unworthy. A new search and the associated costs begin. |
| 2 | Lost Onboarding and Training Costs: This process is likely completed before a bad fit is identified. |
| 3 | Impact on Staff Morale: An embarrassing hire leaves staff wondering why the hire occurred and frustrated to go back to covering the opening. |
| 4 | Impact on Clients and Vendors: Having introduced the new hire to those contacts, a communication is needed to notify that the new hire did not work out. |
| 5 | Further Lost Revenue: The number of days until the position is finally filled has been extended. |
Addeline then added that the placement fees include a replacement hire should an initia hire not be successful.
Looking at this flip side of hiring, the HR manager had to agree that engaging a staffing and recruiting firm, with its deep resources and experience, had a higher likelihood of finding the right person sooner, reducing hiring process expenses, and, in the possible case of a bad hire, recovering the placement fee expense.
Sourced from:
- SHRM, “The Real Costs of Recruitment,” Katie Navarra, April 11, 2022
- AIHR, “Cost per Hire: Definition, Formula, and Calculation,” Erik van Vulpen
