In a recent article in 'The Interbiznet Bugler', it is stated that the Saratoga Institute, often seen as the ultimate source of HR thinking, typically describes "cost per hire" as the sum of administrative costs and expenses, and Infomart-USA, a hiring practices auditing company, estimates the national average at about $4,400. They consider the elements of cost per hire to be the following:
- Advertising
- Agency fees
- Employment fairs
- Employment office salary expense
- Employment office facility expense
- Estimate of time spent in training
- Recruiter travel expense
- Internal recruiter expense
- Internal recruiter labor expense
- Referral Bonus
- Recruiting & Training expense
- Uniforms
The means used to calculate the administrative cost per hire is deeply understated.
So what is the real cost per hire - or more importantly, per not hiring?
The cost of a hire is the money lost because the hire wasn't made. Well recognized in MBA programs and broadly understood throughout the rest of the organization, the simple concept is "opportunity costs".
At its most basic, the opportunity cost associated with a particular hire is the productive revenue lost because the hire wasn't made. Ask an IT manager with 20% of her desks unfilled whether she cares about the administrative costs in the Recruiting department. Of course she doesn't. She's working weekends and late evenings while continuing to miss deadlines. She is experiencing the real cost per hire: revenue lost from employees who weren't hired.
Here's an easy way to get your arms around the real cost per hire in your organization:
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1. |
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Take the annual sales of your company (or division) and divide it by the number of employees. This is the annual revenue per employee. |
| 2. |
Divide that number by 250 to get the daily revenue per employee. |
| 3. |
Multiply daily revenue per employee by the number of days it takes to hire an employee. |
| 4. |
If you want, add the dollars spent by the Recruiting Department (it's a minor fraction). |
| 5. |
This is the real cost per hire. Generally it's 5 to 10 times the administrative costs. |
If your company is feeling the cash crunch of not hiring, or not being able to hire the right employee as soon as needed, have you considered outsourcing? Industry experts acknowledge that outsourcing has become a standard business practice. Outsourcing functions like logistics, administration, help desk/IT, payroll etc. can save you as much as 20%. What if outsourcing your selling functions could save you 20% in cost...AND INCREASE SALES REVENUE AND PROFIT MARGINS?
Eliminate the Cost of not Hiring, and Invest in Your Company's Growth Instead.
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Our business development specialists will assess your current sales strategy, devise a comprehensive marketing plan, develop a process driven organization, then manage it to meet your corporate goals all within 45 days!
By partnering with Sales Focus Inc. you can do what you do best and turn the cost of hiring...or not hiring...into a cost effective investment in your company's growth.
Our wide variety of services gives you a high degree of flexibility. Sales Focus consulting services, sales training programs, business plan development, recruiting and sales management have the ability to be implemented on their own. You have the option of selecting and implementing the services necessary to meet your company's immediate needs. Over time you can implement additional services. We can crawl before we walk, walk before we run or simply sprint to the winning finish line...the choice is yours.
