Pre-hire assessment specialists, ThriveMap, have developed a new, easy to use calculator that quickly and simply shows just how much failed hires could be costing businesses every year. Just a few readily available details, such as current employee headcount, % of headcount growth per year and staff turnover are needed to determine the full cost of getting recruitment wrong. The calculator, which has been developed in-house, using data from ONS, Oxford Economics, Leadership IQ and the CIPD, reveals not only the logistical costs incurred of hiring a new individual, such as agency fees or advertising, but also the impact of lost productivity associated with failed hires too.
How much do failed hires cost?
51% of HR Directors admit to not knowing their average cost per failed hire. More still said they didn’t know how to accurately work it out. The calculator can indicate the cost for any size of business in any industry. For example, a company with 500 employees in the hospitality industry, that is looking to increase its headcount by 5% a year and has staff turnover rate of 15%, which is equivalent to the UK average, bad hires are costing them a staggering total of £406,038 a year.
Bad hires have a significant impact on productivity
The lost productivity element is a very important factor that businesses should consider, but often ignore. Research* conducted by ThriveMap early this year highlighted just what a significant effect it can have. Their survey found that employees who felt they fit their role and the culture of their employer rated their productivity at 7.2 out of 10. This compares to just 5.3 out of 10 for those employees who felt they were a poor fit for both these factors, essentially bad hires. This is a 36% difference, illustrating what a considerably impact this can have on the bottom line.
Knowledge is power
The results of these hiring failures can be hugely costly, but surprisingly few are measuring just how much. Over half of organisations in the UK say they don’t know how much the average cost per hire in their business, let alone the cost of failed hires. When you consider that 70% believe they have lost money through recruiting employees which haven’t worked out, there is clearly a gap in reporting that HR departments need to fill. If organisations don’t know how much they are losing by hiring the wrong employees, they are powerless to address this drain on their resources effectively.
Chris Platts, CEO of ThriveMap said,
“We are passionate about helping organisations find the right employees for the right job. Revealing the true cost of getting recruitment wrong, is an invaluable tool to highlight the seriousness of the issue. At a time when HR Directors are fighting for a seat on the board and for their function to be viewed as integral to the success of any business, we believe this calculator can help them have more informed conversations with senior colleagues, demonstrating just how important investment in creating a successful recruitment process is.”