Articles and Presentations

DC Velocity October 2004

The Hidden Costs of Hiring
By Donald Jacobson and Shelley Safian

You're determined to hire the best and you know it's going to cost you—there will be advertising expenses, wages and benefits, travel and relocation costs, and maybe even executive recruiters' fees. And that's not the half of it. Although few managers realize it, there are also "hidden costs"—administrative expenses associated with the process—that can pile up quickly. Dollar amounts vary depending on the geographic region and type of position, of course, but a typical company can expect to incur some or all of the following:

1. Strategic planning costs. Yes, it will take you away from your daily responsibilities, but a crucial part of the process is stepping back to consider what kind of person you need to hire. That means setting aside time to figure out exactly what you want from this new staff member and to articulate the qualities, characteristics, skills and traits you're looking for. Resist the temptation to rush through this step. You can't pick the best available candidate if you don't know what you want and need.
2. Advertising costs. Aside from the obvious costs—fees for placing an ad in the local newspaper or on the hottest online job site—there are quite a few hidden expenses. At a minimum, there's the time it takes someone—whether it's you or someone from human resources—to write and place that ad.
3. Costs incurred in receiving the resumes. If you're not using one of those expensive recruiting software packages, someone has to wade through the e-mail responses and print out the resumes. As anyone who's tried to hire in the last few years will tell you, that could be a lot of time and paper.
4. Costs incurred in sorting the resumes. Someone has to screen the resumes to weed out the candidates who don't meet the minimum qualifications and sort the remainder into piles labeled "Maybe" and "Definitely Consider." That alone could take days. It's not unusual to get more than 500 responses to a job opening posted on a popular Internet job board (although at least 400 of them will most likely prove to be a total waste of time).
5. Interview costs. Once you've culled the top candidates from the pile of resumes, it's time for telephone screening. That means calling each candidate, setting up an appointment and conducting the first round of phone interviews. You can conservatively figure each interview will take 20 minutes of your time.
6. Costs of skills assessment. These are the costs you'll incur if you decide to conduct any testing to make sure the candidate meets the position's criteria or will fit into the company's culture.
7. Costs of conducting reference and background checks. It sounds quick and easy, but checking the references provided by your finalists will be anything but—it takes time to try to break through the legal wall of "Yes, she worked here on those dates. That's all I'm permitted to say." It's also wise to budget for multistate background checks to assure that candidates have represented their credentials accurately and don't have criminal records.
8. Costs incurred in negotiating the salary and terms. When hiring for upper-level positions, expect to spend time hammering out the terms: the exact salary, benefits such as moving expenses and other details.
9. Costs of sending rejection letters. Though it's not required, sending out rejection letters shows consideration for the people who took the time to apply for the job. You never know, you might want one of them to come work for you someday.You might even end up soliciting some of them as customers.

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