Do you feel like you are ahead of the dollars and cents game when you decide “NOT” to use the services of an executive recruiter in your recruiting and hiring plans? You might realize why bring a third party into the situation and pay a fee, but have you ever really looked at the costs involved when your “chosen hire” doesn’t work out?
Numbers related to the costs of a bad hire vary, but here are some estimates from various sources. According to the Recruiting Times, “It costs $7,000 to replace a salaried employee, $10,000 to replace a mid-level employee, and $40,000 to replace a senior executive.”
The US Department of Labor estimates that the average costs of a bad hire can be “equivalent to 30% of potential first-year earnings.”
According to a presentation titled, Recruitment and Selection, from the Society for Human Resource Management, “replacing supervisory, technical and administrative staff can cost anywhere from 50 to several hundred percent of a person’s salary.”
A quick calculation using Automatic Data Processing (ADP)’s “Cost of Bad Hire Calculator” revealed these results based on an employee earning an annual salary of $40,000 with no relocation costs:
“The total cost for a bad hire of an employee making $40,000 a year is $53,171.15”
The fact is that the costs of a bad hire will vary from company to company and situation to situation; however, there are “direct” costs that you can measure, such as an employee’s salary and benefits, and “indirect” costs that are difficult to measure, such as lost productivity, time lost by other managers, or employees involved in the process. hiring process, and/or time spent training a bad employee.
So while you may view paying an executive search recruiter a fee as an unnecessary expense, it could contribute to your company’s bottom line in the long run.
Professional executive recruiters can prevent your company from wasting money on a “bad hire” by using their expertise in the field and access to the “best employees” in your industry. Most of the time, these “best employees” are already working and excelling in their current positions; however, an executive recruiter can help your company locate and attract them. Over time, when they turn out to be “good hires,” this gives you a return on your investment through their productivity and performance.
Plus, you get back all the time you normally spend on the recruiting and hiring process by doing tasks like: writing a job ad and placing the ad, receiving and reviewing resumes to find potential candidates, scheduling interviews, arranging a “second” round of interviews, run background and reference checks, extend an offer…and if the candidate you hired doesn’t work out, start over, not to mention the lost costs of “bad hire” salary, benefits, training and mentoring. costs, the time you dedicate to interviews and the selection of the best candidates.
So while you may think that acting alone in the recruiting and hiring process saves you money… it may actually increase the likelihood of lost revenue. Partnering with a professional executive recruiting firm increases your chances of not only earning a return on your investment, but increasing your company’s profits in the long run by recruiting and hiring “top performers” who set the bar. difference in the results of your company.
**Discover the cost of a bad hire to your organization: “ADP Bad Hire Calculator”
