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The Cost of Recruitment and the Price of Mistakes

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When a company opens a position for a new professional, discussions often arise about the cost of recruitment – what does the price tag look like, and what does it include? In this article, we will delve deeper into the costs of recruitment and the potential losses for missed recruitment.

Recruitment can be completed in various ways, and part of the final cost comes from the methods and channels used. Along with creating and publishing a job advertisement, the recruitment process typically includes numerous internal meetings, job marketing, and interviews with potential candidates. These tasks can be handled internally or with the support of an external partner.

Recruitment consumes resources – time often equals money

The choice of tools alone does not reveal the whole truth about recruitment – what other costs should one be prepared for? The cost of recruitment is always influenced by the complexity and urgency of the search, the time spent, and the salaries of all involved in the recruitment process.

Headhunting is a common tool in expert recruitment in particular. However, it requires time, expertise, and networks. Potential candidates are often sought out even though they are still in their previous employment. When filling a particularly demanding position, it’s beneficial if the recruiter already understands the job market and can choose the right channels to find the right talent.

However, not all companies have an HR department or an HR-focused person responsible for or particularly knowledgeable in recruitment – in these cases, initiating the recruitment process and achieving results can be especially slow. And the longer the position remains unfilled, the more likely it is to start reflecting on the company’s bottom line.

A bad hire is a significant additional expense

Although the costs incurred by recruitment are usually predictable in advance, failures do sometimes occur. Since a bad hire can have several different causes, the costs can vary greatly.

Even a failed recruitment includes the costs of carrying out the recruitment process and, for example, media expenses. Money is also lost in the form of salary costs for the time the incorrectly hired person has worked. Naturally, the price depends on the salary and how long the incorrect hire has worked in the company.

Alternative costs can also be calculated for a bad hire, i.e., the revenue the company has already lost while employees focus on advancing recruitment instead of billable work and will continue to lose while searching for and onboarding a replacement.

Expert positions may have long onboarding times for the new hire to grasp their role and the organization’s strategy fully. While ideally, onboarding pays for itself, the resources used are essentially wasted in the case of a bad hire. A rough estimate is that finding a replacement and reaching a productive stage could take up to a year.

Keeping it together with a partner’s help

The cost range for bad hires is wide, and researchers have quite varied estimates. However, the total costs can easily be in the range of 50,000 euros or more, depending on the position of the hired person and the direct effects their loss has on the rest of the staff or customers.

A carefully conducted needs and skills assessment and planning of the recruitment process from the outset inherently support successful recruitment. Especially for more demanding positions, it’s essential to spend enough time evaluating candidates because the consequences of a potential bad hire are more significant.

If there’s a lack of time or expertise in these matters, it’s advisable to carry out the recruitment in collaboration with a partner. Depending on the need, Barona can assist with direct searches, suitability assessments, or marketing campaigns to increase the visibility of the search. Thanks to a ready database of applicants, it may not always be necessary to start seeking suitable candidates from scratch.

It’s important to remember that while turning to a partner does mean an additional cost for the company, it frees up its employee resources. At the same time, the company benefits from the expertise that the partner has accumulated through their recruitment experiences. Additionally, the number of unpleasant bad hires reduces when they process is handled by an experienced partner.

In conclusion, the complexities and costs of recruitment underscore the importance of a strategic approach. From internal resource allocation to the potential high costs of mis-hires, every stage of recruitment carries financial implications. Partnering with a seasoned recruitment agency can offset these costs by leveraging their expertise and resources, streamlining the process, and reducing the risks of costly hiring mistakes. Ultimately, the goal is to find the right fit for the role and the company, ensuring the investment in new talent yields the best possible return.

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