Feeling ahead of the dollar and penny game when you decide “NOT” to use the services of an executive recruiter in your recruiting and hiring plans? Maybe you imagine why you bring a third party into the situation and pay a fee, but have you ever really taken a look at the costs involved when your “chosen hire” doesn’t work out?
The numbers regarding the costs of a bad hire vary, but here are some estimates from various sources. According to 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 poor hire can “equal 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 managerial personnel can cost between 50 and several hundred percent of an individual’s salary.”
A quick calculation using the Automatic Data Processing (ADP) “Bad Hire Cost Calculator” revealed these results based on an employee earning an annual salary of $ 40,000 with no relocation costs:
“The total cost of poorly hiring 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, lost time from other managers or employees involved in the job. hiring process, and / or time spent training a bad employee.
So while you may consider paying an executive search recruiter a fee as an unnecessary expense, in the long run it could contribute to the profitability of your company.
Professional executive recruiters can prevent your company from wasting money on a “bad hire” by using their experience in the field and access to the “best employees” in their industry. Most of the time, these “high achievers” 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 your productivity and performance.
In addition, you make up for all the time normally spent in the selection and hiring process by performing tasks such as: writing a job advertisement and placing the advertisement, receiving and reviewing resumes to find potential candidates, scheduling interviews, organizing 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 lost costs for salary, benefits, training, and “bad employee” orientation costs. , the time devoted to interviews and the selection of the best candidates.
So while you think doing it alone in the recruiting and hiring process saves you money … it can actually increase the likelihood of a loss of income. Partnering with a professional executive recruiting company increases your chances of not only earning a return on your investment, but also increasing profits for your company in the long term by hiring and hiring “high performance employees” who make a difference. in the results of your company.
** Find out the cost of a bad hire to your organization: “ADP Bad Hire Calculator”