- Posted by: adminbb
- Category: International
Photo by Govinda Valbuena from Pexels
Aesop’s Fable, ‘The Fox and the Grapes’, is a story that any human resources manager will be familiar with from personal experience at some point in their career; that bad experience after a promising employee fails to fit in, becomes disgruntled, and then things go pear shaped.
A hungry fox passed below a fine bunch of grapes hanging high from a vine. After trying in vain to jump and reach them he gave up, saying to himself as he walked off, “The grapes looked ripe, but I see now they are quite sour.”
The moral of the ‘Fox and the Grapes’ metaphor for a human resources executive is to always do your due diligence whenever hiring anybody by doing proper background screening checks to see if the candidate really is suitable for the job. If, like the fox, the employee can’t reach the reward for a bit of effort – and wouldn’t appreciate it anyway – off goes the employee plus considerable wastage of an investment.
The costs to a company when an employee leaves and is replaced are significant. There are tangible, measurable expenses but there hidden, intangible costs, too.
The High Cost of Hiring
US$3,000 is the average logistical cost of recruiting and screening a new hire but that’s only a fraction of the compounded costs of replacing an employee are much higher, as much as $30,000.
A study carried out by Oxford Economics revealed that the cost of hiring a someone to replace an experienced employee has much greater financial impact on a company than recruitment expenses alone.
Cost of Lost Output
When an experienced employee with an optimum productivity level leaves an organization, it causes a sudden drop in productivity while the new employee gets up to speed with the job, which takes about 28 weeks on average.
The Oxford study, The Cost of Brain Drain, looked at the overall costs of replacing employees in five key sectors: IT/Tech, Accounting, Legal, Media/Advertising and Retail. The hidden costs are startling.
Losing a staff member on a £25,000 or higher annual salary generally costs a company in any sector more than a year’s pay for that person. In retail, the average cost of replacing an employee is just over £20,000.
For legal firms, the financial impact from the loss of an experienced employee is much higher; almost £40,000.
Logistical Costs of Hiring New Employees
The costs directly related to the logistics of recruiting are much less than the impact of a well-rounded employee leaving but they still add up to significant expenditure, even before a new recruit is on board and peddling furiously to reach optimal productivity.
Here’s a breakdown of those recruiting costs:
Advertising a job vacancy – £398
Paying recruitment agency fees – £454
Cost of time invested in screening applications and interviewing candidates – £767
Cost of HR staff hours spent processing a new employee – £196
Hiring temporary or casual workers before recruiting a permanent replacement costs £3,618, bringing up the average businesses spend to £5,433 in total.
Those costs are by no means set in concrete. They vary greatly depending on the industry and the nature of the company. The more specialized or bespoke a company’s service, the greater the financial impact of replacing a knowledgeable employee.
Experience Worth its Weight
In an ideal world, a candidate comes along with experience from working in a similar role, allowing them to hit the ground running as they dive into a new position in somewhat familiar territory. In that case they’ll quickly reach optimum productivity – usually within about 15 weeks.
However, a new employee arriving from a different sector typically takes twice that amount of time – about 32 weeks, and a fresh graduate takes almost an entire year to reach their level of optimum productivity (40 weeks).
The path to optimal productivity in a large firm is usually longer than in small enterprises, where organizations with fewer than ten employees can get up to speed within about 12 weeks.
A new recruit in a company with a 500-strong workforce takes about 18 weeks to become proficient. The shorter timeline in smaller companies is assumed to be an accelerated learning curve due to greater exposure to management with more immediate feedback.
Other related recruitment costs are a lot less in a small company, which usually doesn’t have to spend as much on advertising vacancies and recruitment consultants.
The average spend for a new hire in a company with fewer than 50 employees is just over £3,000. Organizations with more than 50 employees spend upwards of £5,600.
Here’s what the survey revealed about how overall recruitment and replacement costs vary by industry from highest to lowest:
IT/Tech firms £1,873m
Accounting firms £580m
Hidden Costs of Inadequate Background Screening
According to a separate survey on recruitment logistics costs by HR.com, most employers (96%) do background screening when hiring new staff, which although costly makes good business sense to invest in putting the right person in the right job.
The full range of background screening includes a criminal record check, an education check, previous employment reference checks and checks for any driving convictions.
The extent to which you do background screening on candidates depends on the job, the industry, and your location.
Screening for criminal records and driving offences is fairly straightforward in the UK but it gets complicated in the US, where there are federal, state, and county levels of data collection. If you want to be absolutely sure a candidate has no convictions, you have to go through each of those layers, which is costly and time consuming.
However, neglecting to perform some checks carries the risk of finding out bad news too late, and getting a case of the sour grapes. Not checking a candidate’s background risks missing important information which could lead to liability, damage to the company’s reputation or even legal action.
Prevention is better than a belated cure. Due diligence with background screening ensure you can filter out dishonest applicants from the start.
The Uncountable Costs of Conflict
When a sour grapes scenario arises from a bad hire, internal conflicts can hugely impact productivity and be more costly than the logistical costs of replacing an employee.
Gossip by a disgruntled employee can be hugely disruptive and cause other conflicts to erupt. In severe cases, a dishonest employee might steal from the company or from other staff members.
The damage done in such cases has far reaching consequences.
You can also lose good workers when a bad hire can’t get along with the team.
Reduce your risk of a bad hire
Different industries have different job requirements so background screening should focus on key areas of responsibility depending on the positions.
The requirements for care workers are not the same as factory workers or drivers. Likewise, the roles and responsibilities of financial officers and food service employees are also vastly different, so you can reduce or expand the scope of background checks accordingly.
Using a reputable background screening agency is a cost-effective way of mitigating the risk of a bad hire. They’ll streamline the process for you to minimize costs and be a barrier to filter out time wasters and candidates that could result in greater long-term losses.