The Rising Cost of Hiring: Avoiding Final-Stage Fails
By Ann Dempsey.
Recently, I’ve noticed a costly trend: after a search and interview, the new employee signs a contract but then changes their mind before their first day of work. They only secured the contract to negotiate with their current boss. I hear about these cases when clients come to me in frustration. Not only does a search cost time and expense for the employer, but the last-minute change of heart delays hiring, and the work or project that required the new hire.
Unsettled Times and Unpredictability
I believe this is happening more now than ever because of the uncertainty of our time. We currently live in a world that feels unmoored: many organisations and people are still negotiating how to implement hybrid or remote work patterns. There is widespread anxiety about rising inflation and in some places, fears of an oncoming recession. On top of that are the continuing developments in (generative) artificial intelligence, which have the potential to collapse many existing job categories.
The Impact of Uncertainty on Hiring
Hiring new staff, especially in such a globally uncertain climate, can be incredibly time consuming and resource intensive. In these circumstances many candidates have a dynamic choice of options, and are not always transparent in discussions with employers, hedging their bets until the last minute or even beyond. McKinsey their research shows that a median sized S&P 500 company can easily lose upwards of $228 million annually to disengagement (usually experienced in the phase before someone quits) and attrition. In my experience, many of these “disengaged” or unhappy employees are the ones who are interviewing to secure a contract simply to be able to negotiate or pressure their current employer into better conditions. They are not serious candidates. However, they will present as such to win the contract.
Direct and Indirect Costs of Hiring
Recruiting and hiring new employees obviously has direct costs associated with it but there are indirect, or soft costs too. A position must be advertised, and applicants screened and interviewed. But open positions also mean a loss of productivity and strain on other employees who might have to cover the responsibilities of that role as well. And that still doesn’t consider the onboarding and training a new hire will have to complete before becoming a fully productive employee.
There are a variety of estimates on how much it costs to replace or hire someone, most commonly that estimate lies at around a third of the employee’s salary. Gallup research suggests that the replacement cost might be far higher – anywhere from one-half to two times the employee’s annual salary. Data by the Society for Human Resource Management (SHRM) suggests a similar number, additionally estimating that about 60% of that are soft costs.
The Last-Stage Fails: A Substantial Loss
Considering all this, any hiring attempt that fails at the last stage – for example, a potential hire who gets all the way to a contract signing, and then changes their mind – is an incredible loss of time and resources, meaning you must re-start a process that can be several weeks, or even months long.
The Role of Recruitment Specialists
This is why there can be a large cost advantage to partnering with someone who specialises in recruitment and has an improved pipeline for hiring. Both the speed of the process, and the ability to find a good match for a position are key factors in optimising efficiency.
Our Approach: Accelerating Efficiency
In our approach, we accelerate the hiring process through the full candidate management funnel. In the initial Search phase, we draw on the community of candidates and freelancers and our personal network of data specialists. We cultivate this community constantly! As a result, we can reach beyond the range of a single employer, tap into hidden sources like academia, and filter candidates quickly through direct feedback within our social media channels.
A diagram showing our hiring process.
In qualifying candidates, we have open discussions about salary and other motivators. We verify resume claims and streamline steps like NDAs, work permits and other items that must be checked off before ever moving on to an interview. Additionally, by combining our deep understanding of a client’s culture and technical needs with our own perspective, we can identify excellent matches that last. Candidates that arrive at an interview are already fully qualified and motivated for our client’s role – not as a strategy to negotiate within their own organization.
In the interview phase, we continue to support, following up with feedback quickly to keep this stage as compact as possible. As we come to signing, our goal is a long-term relationship with the client. We are as motivated to sign candidates who will thrive in their new role as our clients are. We also have learned over time, that well-placed candidates are one of our best sources for new candidates. We continue to connect with them – and their connections – through our community events and social media. This is part of the community cultivation that enables a quick search phase for the next key hire our clients need.
Conclusion: Reducing Uncertainty and Hidden Cost with Better Hiring
Navigating the intricacies of hiring in today’s dynamic landscape demands a strategic approach. Partnering with us provides more than just a solution; it’s a pathway to efficiency and cost reduction. If you’d like to delve deeper into how our specialized recruitment strategies can not only accelerate your hiring process but also significantly reduce attrition rates, I would be happy to set up a call with you. Send us a request on our contact form or send me a DM in LinkedIn and let’s talk soon!
