Fact or Fiction: A Low Cost of Hire is Always Good




  • July 17, 2015

    We often hear the phrase “less is more” tossed around in a variety of everyday scenarios. No matter what the situation, the idea is simple: put in less of X, get more of Y. And who doesn’t love a steal of a bargain? If we find a home that’s under market, “less is more.” If we happen to find a great deal on a car, “less is more.” And, in the case of talent acquisition, if we’re able to hire a job candidate for less money than we originally thought? You guessed it, “less is more.”


    But does this really ring true for talent acquisition? Are you really saving money in the long term because you hired a candidate under budget? Fact_or_Fiction_2.pngConsider another example that many of us are familiar with: buying a new computer. There are so many options out there with such a wide range of prices, and anyone’s goal would be to get the best performing computer at the greatest bargain. Computer A not only runs great, but is also designed to last the longest. Likewise, its rock-solid build makes it the most expensive option. Computer B sounds great on paper and, while it’s not guaranteed it will run as well as Computer A, it’s much cheaper and seems worth the investment. Computer C is modest in performance and in price. Depending on your needs you might be inclined to pick any one of the three, but chances are many will pick Computer B, the affordable, seemingly “steal of a deal” computer. Only, what happens if Computer B runs well for awhile and then needs constant repairs for hardware and software alike? Or, even worse, what if Computer B stops working and needs to be replaced? Suddenly the money you “saved” on Computer B is actually costing you much more in repairs or reinvestment.


    Your talent acquisition strategies work the same as the computer example above. Candidate A is a gold star, cut above the rest type of candidate. The candidate aces the pre-hire assessments, interviews well, has plenty of experience, and is fully capable of doing the job you’re looking to fill. Candidate B is good, and it doesn’t cost as much to hire this candidate, but you run risks by bringing this candidate into the fold. Candidate C is your “quick fix” type candidate. Much like the computer, the cost of hiring Candidate B is much higher and results in a bigger impact than taking the extra investment in hiring Candidate A. This breaks down to two categories: soft costs and hard costs:



    • Hard Costs are your “what was the cost of, and subsequent return on, this candidate” type of numbers. What did you invest in recruiting, hiring, and training this candidate? Subsequently if the candidate leaves that immediate cost would factor in here. Many companies estimate that a candidate who leaves early costs them about $ 4,500.
    • Soft Costs are better conceptualized as your “hidden costs.” In other words, by this candidate leaving what isn’t showing up in the books right away? This can include loss in revenue from sales and customer satisfaction, the time it takes to fill that role, and any other areas this candidate may have cost your company revenue. These are soft costs because they’re largely immeasurable for a number of reasons, thus making them difficult not only to deal with, but to plan for as well. Some companies have reported these costs to be between $ 10,000 to $ 15,000.

    If we know that Candidate B holds all these risks and potential hidden costs then, what’s the answer?


    Look to Candidate A. Or, in other words, don’t look at the “cost of hire,” but rather consider the “quality of hire” instead. The appeal to Candidate B isn’t that it’s the same quality of candidate for a lower cost, it’s that it’s the “best bargain” candidate of the three. This is hazardous to talent acquisition because it’s now treating the employees like saving opportunities, when in fact an employee should be considered for the revenue opportunities they could bring into a company. In other words, trying to save money through hiring can end up costing a company more, but investing a little extra in hiring can yield much higher revenue opportunities for an organization.


    The “steal of a deal” employee might seem tempting at first glance, but take the time to invest a little extra in your job candidates. The results will be tremendous, whether they be in performance, ROI, company culture, or any other number of areas.


    Want to learn more? Contact us today, or download our whitepaper on how to build a quality of hire report card that will make sure you’re getting the Candidate A’s out there.New Call-to-action


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