Recruiting & onboarding new employees is expensive

We get it, recruiting and onboarding new employees is expensive. In fact, recruitment is likely to be one of the biggest investments your business makes. Not to mention, one of the most risky.

In addition, the cost of staff wages is also likely to be one of your biggest business overheads. As a result, like most senior leaders it’s likely you want to reduce your recruitment costs.

However, its important to realise that many companies efforts to reduce hiring costs actually ends up increasing them. This is particularly true when it comes to SME’s.

Unfortunately, most significantly, many are unaware of the negative effects of their efforts.

In short, this is largely due to a lack of understanding on how to calculate, track and therefore measure the true costs of recruitment. Many of which are hidden costs.

“Regardless of whether you opt for an inhouse or outsourced recruitment strategy, recruiting & onboarding talent is a significant investment.

However, a point often overlooked is the potential danger of reducing hiring costs can increase the risk of achieving a return on investment”

As a result, all to often companies look for savings in the most obvious areas, rather than the most commercially beneficial.

The fact is recruitment is expensive. Regardless of whether you opt for an inhouse or outsourced recruitment strategy, recruiting and onboarding talent is a significant investment.

However, a point often overlooked is the potential danger of reducing hiring costs. In short, this can increase the risk of achieving a successful return on investment.

The best way to reduce recruitment costs is simple

If you only focus on the headline costs, then it’s true, Recruitment is expensive. However, if you look at it from the opposite direction, top talent will deliver better capabilities, performance, and as long as you retain them, far greater returns on your investment. So the best way to reduce recruitment costs is simple. Recruit less people, by focusing on attracting, developing and retaining the best talent.

Until certain leaders recognise that people are an investment. Look after them like any other high value asset. They will fail to attract and retain the best talent.

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…

In recent years many companies have allowed an unhealthy obsession with cutting hiring costs to grow into their culture. Of course, finding the most commercially beneficial solution for the business makes complete sense.

However, unfortunately many companies have become blind to the fact that investing in attracting, developing and retaining top talent has a significant effect on business performance and profitability.

Instead they have developed an unhealthy obsession of underinvesting in their people.

The cost of a poor hire, compared to the return on investment a high performance employee delivers, gets forgotten.

As does the fact that a poor talent attraction and acquisition strategy can fail to deliver the calibre of talent the business needs. And therefore wants to retain.

Or on the other hand, under investing in the recruitment process fails to reach, let alone deliver the candidate experience required to attract and acquire the best people.

If you think recruitment is expensive, the cost of staff attrition is even more so. Combine this with the overhead of carrying less capable employees, investing in talent management should be a no brainer.

However, the ability to reach, attract, acquire and retain best in class talent is influenced at each touchpoint of the candidate journey. And continues throughout their tenure, based on their employee experience. Investing in talent management will ultimately improve the quality of hire. Staff retention. And as a result, reduce hiring costs and increase business performance.

The cost of staff attrition

The cost of staff attrition is estimated, on average, to cost a business 3x – 5x the annual remuneration of the position. This can increase dependant on the seniority of the role. Or, indeed how critical the position is to a business’s performance.

What is also important to realise, is that in todays increasingly competitive talent market, these costs are only going to increase. Time to hire as well as failure to attract the right calibre of talent, amongst numerous other factors, all have a quantifiable expense.

On average it takes a new employee 6 months to reach full productivity. The quality of hire, and their capabilities effects their level of productivity. As a result, their performance effects their contribution to P&L. And therefore the return on investment the employer receives.

In addition, it takes 12 months for the employer to break even on their recruitment and onboarding investment. So, law of averages suggests a business will make a loss on their recruitment investment during the first 12 months.

Therefore, it is essential for businesses to hire the best calibre of talent, and retain them for a minimum of 13 months. At least it is if they want to achieve any sort of return on their investment.

“staff attrition is estimated to cost a business 3x – 5x the annual remuneration of the position

on average it takes a new employee 6 months to reach full productivity

it takes 12 months for an employer to break even on their recruitment & onboarding investment”

So, with this in mind, there is compelling evidence that prevention is better than cure. Or, to put it another way, talent retention is key.

If you think recruitment is expensive, the cost of staff attrition is even greater. The best way to reduce your recruitment costs is to recruit less. Ultimately, this requires an investment in creating and executing a sound talent attraction, acquisition, development and retention strategy.

Employee attrition is detrimental to business success

The great resignation is impacting businesses worldwide. But even before today’s record levels of staff quitting their jobs, some businesses have always had a high turnover of staff. Ignoring the fact that employee attrition is detrimental to business success is, to be blunt, poor leadership.

A high turnover of staff is a clear signal of an organisational issue. Unless resolved, this will continue to negatively affect profitability and prevent the business reaching its potential.

Research, in March 20021, of 500 HR Decision makers. Over 2000 staff across various industries, sizes of businesses, throughout the UK and Ireland, suggested:

• 38% of employees are looking to change jobs in the next 6-12 months.

• 45% of HR professionals are worried employees will leave as the job market continues to improve.

• Worryingly only 26% of HR leaders said talent retention is an organisational priority.

The report also demonstrated the clear disconnect between senior leaders and their employees. A lack of investing time, money and interest in understanding peoples true feelings. Their motivations and desires, is effecting many companies ability to retain their staff. Those staff that remain are unmotivated. Less productivity and even dare I say it, perhaps less talented.

The balance of power has shifted. Talent is in short supply and high demand. As a result, the competition for top talent, combined with the current record levels of job opportunities, has given employees the upper hand.

Leaders who recognise the importance of creating a talent management strategy that focuses on people and culture will attract and retain the best talent. As a result, they’ll gain a competitive advantage over their industry rivals who fail to invest in their people.

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.