Many talent management conversations build to the quantification question: How much does it cost? Here are two answers:
The Risk-Reward of Quality from staffing.org uses this general context for hiring risk:
• Cost per hire is typically only 8%–12% of first-year compensation.
• The cost of poor retention (high turnover) is typically around 50% of first-year compensation and can easily top 100%.
• Poor performance, however, is a multiple of compensation over the entire employee lifecycle.
According to Futurestep, a conservative estimate of a frontline / middle manager leaving after three months is $60k – The Real Cost Of A Bad Hire In 2010. Use that factor in a company with thousands of employees and it multiplies quickly. So the question is not simply how much ROI will you achieve from improved processes and savings. It’s mitigating the aggregate risk of losing $60,000 for every bad management hire.
Companies such as Sara Lee are taking a strategic approach to staffing with a focus on quality of hire.
Michael Whitlow, Human Resources Director, said that "although Sara Lee had an effective centralised and internal recruitment model within the business, our organisation is keen to take its sourcing strategy to the next level by maximising the use of leading edge recruitment technology (Taleo) and integrating best practice approaches to sourcing into the business.
Focus on process to reduce your costs. There are hard costs in resources and technology associated with proactive, strategic action. And there are calculable costs from poor process and lack of technology support for talent management practices. Make sure you are cognizant of both the costs and the quantifiable returns.
