Strategies to improve recruitment processes and reduce recruitment costs

Recruiting the right people is the bread and butter to the success of any organization. No product, no service can thrive without the right people on board. Bad hires jeopardize the success of company, product, and service. Not only that, bad hires put team morale at risk, undermine collective efficacy and collective vertical trust, and hurt the bottom line. Undoubtedly, recruiting only the best is paramount.

Getting the best in a competitive market is time-consuming, accrues expenses, and even a good candidate does not always turn out to be a great fit for the company. How can we  support human resources, managers, and team members involved in recruitment activities to make better decisions and save time and keep costs low?  
What are the best ways to soothe the impact on all those involved, make recruitment more efficient and simultaneously reduce costs? Here a few statistics and one very powerful solution to making recruitment more efficient and saving costs.

Recruitment costs – how much does it cost to hire?

Recruitment is a crucial element for success. With recruitment costs on average somewhere in the region of 3,000 to 4,000 Dollars/Euros per new recruit – the cost per hire (CPH) – reducing the costs associated with recruitment is pivotal. The average cost per hire includes any costs, including lost working hours of those involved in the recruitment process. Other factors that are crucial in calculating the true cost per hire is the time and thus the expenses associated with acclimatization, the time it takes the new hire to be at a point where they can perform at full capacity, the associated training costs, relocation costs, and any type of costs associated with finding, selecting, and recruiting new hires.

If you were to hire ten new employees, the average total cost would be somewhere in the region of 30,000 to 40,000 Dollars/Euros. These numbers are before they have been paid their salary. Importantly, the 3,000 to 4,000 Dollars/Euros are for low to mid-range positions. For expert positions or C-Suite these numbers are generally a multiple. Getting recruiting right and keeping the costs low is thus paramount. It will take some time before the new hire earns the recruitment costs back. That is, if the new employee is in fact a good hire and does not turn out to be a bad hire who limits instead of boosts performance.

The costs of bad hires

Bad hires are not only a nuisance, they are also expensive and damaging to morale and team performance. An organization that succeeds in hiring more than 80% of good candidates from its pool of potential hires has done a great job. Many companies fail to achieve that target and end up with hires that are unmotivated, demonstrate subpar performance, or may resign within months. The latter may be the most ideal situation for companies. A worse case scenario is bad hires that stay with the company, unwilling to develop, and negatively affecting productivity and performance long-term.

Numbers from the hospitality sector give an indication of their financial impact. A bad hire may lead to unnecessary expenses in the range of USD 30,000 to 60,000. Thousands s shed off the bottom line. These five figure sums are in addition to the original recruitment costs and are for low level employees. Bad hires in leadership roles accrue a multiple of these costs. Bad leaders not only fail to deliver as individuals and affect others around them. Their lack of competencies also has detrimental consequences for their team and far beyond. While a bad hire as a team member may be annoying to colleagues, a bad hire in a leadership role is likely to lead to the departure of important team members and top performers.

It is not the recruitment costs per se that are important to consider, the costs of bad hires are even more profound. Especially when the market is competitive or organizations are pushed for time, human resource departments and managers find themselves under a lot of pressure. It is only two of the reasons why organizations occasionally struggle to keep costs low while also recruiting good hires that perform and are happy to remain at the company.  
The latter is ever so pronounced for leaders. As mentioned before, who they are and what they do has a much wider impact than for any other employee. Leaders who come to realize that they are a bad fit and resign shortly afterwards create a vacuum that is consequential for the entire team. A too frequent turnover of team leaders creates instability and undermines performance. A bad fit for the team negatively affects member performance and the relationships within the team. Either situation has consequences far beyond the leadership position and the team. The impact is frequently felt far beyond the team. It is therefore crucial to keep bad hires in leadership roles to an absolute minimum – not only from a cost perspective, but also regarding the numerous knock-on effects.

How can psychometric tests help your recruitment strategy and reduce costs?

Recruitment doesn’t have to be expensive and risky.  Psychometric measures in recruitment can address both these issues: reduce costs and improve the chances of good hires. They are also highly effective at determining the fit of a candidate and his or her potential for improvement.

Strategies to improve recruitment processes and reduce recruitment costs

Reducing recruitment costs

With recruitment costs alone in the region of 3,000 to 4,000 Dollars/Euros, any tools are welcome to ease the strain on the organization’s finances. Psychometric tests are an effective tool to comb through a pool of candidates. As costs may be a multiple of the average for leadership roles, psychometric leadership measures yield even greater cost savings. Psychometric measures tap deep into the candidate’s personality and reveal relevant competencies, in turn minimizing the time required to test for them in personal interviews.

Improving the chances of good hires

Psychometric tests used in recruitment generally benefit the quality of the selection of candidates. Able to identify a candidate’s competencies, psychometric measures, and particularly those for leadership roles, are essential tools in making sure that a candidate suits a particular leadership role.

Through the comparison of a candidate's psychometric leadership profile and the requirements for the position that needs to be filled, organizations are able to improve their chances of finding people with the right profile and determining the fit with the post, the team, and the organization. As potential candidates can only assume what the perfect profile would be, it is difficult to manipulate the scores of the psychometric measure to better fit the requirements of the leadership post. An attempt to trick a psychometric measure is also of little use to the candidate, as his or her profile, if not corresponding with the needs of the team and the organization would sooner rather than later undermine his or her leadership influence.

In addition, manipulating a psychometric leadership measure in the hope of matching the leadership job profile proves to be very difficult for the aforementioned reason of not knowing what is required but also the very nature of psychometric measures. For laypeople it tends to be difficult to determine how scores are calculated and what question items correspond to which leadership competency.

Psychometric measures are pivotal in increasing the chances of good hires, particularly when dealing with important leadership posts and minimize not only costs but also any potential negatives from the wrong person.

For further information on how we can help you reduce your recruitment costs, increase the fit and quality of potential incoming leaders, please refer to the Effective Leadership Measure , a psychometric measure specifically developed for the recruitment and development of leaders. For the German version of the Effective Leadership Measure, please refer to Effektiver Führungskräfte-Test .

We also offer a psychometric leadership measure specifically designed for football (soccer) club directors. Please refer to the Club Management Measure  for further information on how our psychometric leadership measure can help you recruit and develop managers and leaders for your football club. 

This article was written by Dr. Markus C. Hasel, Managing Director of MCHasel Human Resource & Leadership Advisory. If you want to get in contact with Dr. Hasel, please use our contact form .