Adding a new player to your team, the true cost

There is a lot of information out about the cost of employment advertising.  Job boards like Indeed focus in on cost per applicant, and ATS (applicant tracking software) can even help you calculate the advertising cost per hire.  These costs are only the tip of the iceberg, and serve to draw an employers attention away from the real expense they should be analyzing.

Employment advertising should be measured in the hundreds per month (if you have a small to mid sized company and are expending thousands each month please contact us immediately to get help cutting that down).  Job boards and ATS’ only talk about advertising cost for two reasons.  First, they do not want to be responsible for applicant quality that helps drive other costs.  Second, it is a simple and relatively low number that makes it seem like hiring is inexpensive.  This could not be further from the truth.

Here are some of the other costs to consider:

  • Time to review and screen candidates prior to shortlist interviews.  On average, a month’s worth of advertising will net 250 applicants (2016 average according to Glassdoor).  Most companies expect department heads to filter resumes and then have someone in the company conduct an initial phone interview to screen down the pool to the final job seekers that will be interviewed face to face.  Estimated work time for this is 25 hours, or $1,000 cost to the business.
  • Lost revenue opportunity while your company is short an employee.  Take a typical sales rep that generates $1,500 in gross profit per work day.  If it takes your company an extra 10 work days to hire, due to a lack of people tasked with screening, you incur $15,000 of lost revenue.
  • Opportunity cost changing a veteran employee with a new employee.  Job boards tell employers that finding a better employee is as easy as a couple hundred dollars and clicking.  Your real cost is the loss in production from a fully trained known quantity, down to a new hire that will take months to get up to speed.  If you hire a new sales rep today it takes a minimum of 90 days for them to become productive, and a year for them to optimize.  If your average rep is producing $1,500 per day you can expect a $1,000 or less on average for your new hire for the first year.  On 250 working days your company can lose $125,000 in profit.
  • Liability to suit for discrimination.  Law are tightening every day guarding applicants against invasions of privacy and being judged on qualities aside from job skills.  Every person that applies is a potential suit risk, depending on how they are handled.  Even ignoring applications runs the risk of a job seeker claiming they were ignored for protected traits, like race, gender, or creed.
  • Damage to the potential labor pool through a lack of responsiveness.  Each market has a set amount of qualified job seekers for a position.  This becomes even more compact when jobs are industry specific.  In most markets job seekers in the same industry know each other, and coach others as to where to apply or avoid.  If your company is gaining hundreds of applicants and only responding to a handful, you may thin the pool of people willing to consider a job with your company so much that only the bottom of the barrel will apply.  This can cost you hundreds of thousands over years.

The good news is you can get a plan in place to maximize your hiring and reduce the true cost.

  1. Invest in an applicant tracking system that communicates to all candidates, so you do not turn off the market and lose the ability to fill positions in the future.
  2. Task an administrative person, or farm out the work, to handle resume review and conduct short phone interviews with the majority of applicants.  Cutting the cost of screening down.
  3. Always advertise for help to build a pipeline of qualified candidates.  This will reduce your time to hire and save thousands.
  4. Have a marketing program to reach back to prior applicants, saving the screening cost and reducing time to hire.  Candidates already on file can be hired an average of 10 business days faster.
  5. Have a set initial phone interview, and conduct it with as many candidates as possible.  This will protect your company from being accused of discriminating, because everyone is being given at least a small opportunity.
  6. Survey people that interview with your company to establish if there are issues or patterns.  This will allow executive management to get in front of complaints before they are sent along to an attorney.

Contact us for more information about reducing your true costs.  We specialize in helping companies help themselves and reduce costs.  We can help for less than the cost of job board advertising alone.

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