Of course, cutting costs is commercially savvy. However, an unhealthy obsession with cutting costs based on assumptions not commercial facts is, on the contrary, having the opposite effect. Discover why investing in your people is now critical to business success & the financial rewards it delivers are far greater…
Of course, cutting costs is commercially savvy. However, an unhealthy obsession with cutting costs based on assumptions not commercial facts is, on the contrary, having the opposite effect. Discover why investing in your people is now critical to business success & the financial rewards it delivers are far greater…
An unhealthy obsession with cutting costs
In recent years, far to many companies have developed an unhealthy obsession with cutting costs. As a result, an increasing trend of underinvesting in talent management crept into their company culture. Ironically, often their attempts to save money, on the contrary, actually increases them.
Now, before continuing I should clarify my point. Cutting costs is certainly not unhealthy. Far from it. Of course I actively encourage all businesses to reduce each and every unnecessary cost they have. This is 100% the correct behaviour of any commercially savvy leader, and should be included in the continuous, critical process of reviewing and maintaining business health.
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However, many companies efforts to reduce their hiring costs are based on assumptions. Rather than true, hard commercial facts. In addition, there is compelling evidence that for many this is having the opposite effect. However, blinded by an unhealthy obsession with cutting costs, and a lack of understanding, they are unaware.
In short, this comes down to a lack of knowledge on how to calculate, track and measure the true cost of recruitment. Or to put it differently, the return on investment in talent achieved. As a result, many make the mistake at looking at reducing hiring costs in isolation.
Significantly, although cutting recruitment costs at the frontend are visible on a company’s balance sheet, it’s important to realise this can be misleading. Unfortunately, many hiring costs are hidden. Therefore they do not show up on a balance sheet.
However, the true commercial results of the success or failure of hiring will show up on a company’s P&L income statement. Although they will be hidden and therefore not directly obvious.
To sum up. In order to understand the most commercially beneficial talent strategy, a business must understand their return on investment in people. And specifically how to accurately calculate, track and measure the results.
Calculating the true costs of recruitment
So, having clarified that reducing costs is essential. Next I should clarify what I mean by the unhealthy obsession with cutting costs. In short, if the cheapest headline cost fails to deliver the return on investment, then it is a false economy. Calculating the true costs of recruitment is complex and requires tracking throughout the tenure of the employee. However, many do not know how to. Or if they do, they don’t effectively record the commercial results of their investment.
Given the complexities of the costs attached to recruiting and onboarding new employees, this is a broad subject for another article. However, what is important to understand is the many hidden costs many fail to consider. And therefore don’t factor into their calculations. Quality of the new recruit, the time to hire, management time, the effect on productivity, and the cost of attrition are just some of the hidden costs.
Regardless of how a business approaches talent attraction and acquisition, whether opting for an inhouse our outsourced model, recruiting and onboarding new employees is expensive.
Knowing which hiring strategy is most commercially effective requires an understanding of calculating the true costs of recruitment, and which recruitment method delivers the best ROI.
“The best way to reduce your recruitment costs is to recruit less. Rather than obsessing with the cheapest hiring method, invest in a talent management strategy that delivers staff retention”
So for now the key take away point is, the best way to reduce your recruitment costs is to recruit less. Or to put it another way, rather than obsessing with the cheapest hiring method, invest in a talent management strategy that delivers staff retention and the best commercial return on investment.
Talent retention delivers far greater financial rewards
Recruiting and onboarding new talent is only one area of talent management. But it is the one area many have developed an unhealthy obsession with. A change of focus that obsesses on talent retention delivers far greater financial rewards than under investing in your people.
If you think recruitment is expensive, a point often overlooked is the fact that the cost of staff attrition is far greater.
“if you don’t invest in your people they’ll leave for an organisation who does & replacing them will be harder & more expensive than ever”
Whichever talent attraction and acquisition strategy you use, make sure it is the most commercially viable one for your business. And understand that hiring is only one aspect of a talent management strategy.
Yes how you approach recruitment effects your ability to retain staff. As does your people and culture strategy, onboarding process and investment in talent development, to name a few other talent retention strategies.
As we predicted at the height of the pandemic, last year, when an influx of talent entered the job market. The war for talent isn’t over, it’s about to get more fierce. This is now being realised, as record levels of job vacancies are available, and as the great resignation demonstrates, talent is in short supply and high demand.
So to conclude, if you don’t invest in your people they will leave for an organisation who does. And in todays candidate driven market, replacing them will be harder and more expensive than ever before.
Pyramid Resource Solutions
Pyramid Resource Solutions is a consultancy, advisory and talent management firm. We provide, facilitate and host a carefully crafted suite of services, products and tools designed to deliver intelligent solutions for intelligent business leaders.
In short we help our clients to build well balanced, multidisciplinary, high performance teams that increase business capabilities, performance and profitability.
Our clients invest in their people, and engage our services to gain a competitive advantage to outperform their competitors. Contact us to arrange a consultation and discover more about our custom built, scalable talent solutions.