Webinar Recap: Calculating the Cost of “Good Enough”
How would you describe your recruiting process? How about your workforce compliance program?
If your answer to either is “well, it’s good enough,” I’m sorry to tell you that you’re wrong. In terms of fostering a high-performing culture, retaining employees and eliminating inefficiencies, there’s no such thing as “good enough.” “Good enough” means crossing your fingers that nothing goes wrong. It’s an unrealistic and shortsighted philosophy that costs your organization needless amounts of effort, time and money.
Just how much effort, time and money are we talking? I recently co-hosted a webinar with Patrick Clark, Hyrell co-founder and director of business development, centered on calculating the costs of “good enough” and what you stand to gain from implementing automated recruiting and workforce compliance programs. Check out some of the facts we discussed together:
“Good enough” means crossing your fingers that nothing goes wrong.
The Cost of a “Good Enough” Recruiting Program
To understand the costs associated with filling an open position in your organization, you first need to determine your cost per hire (CPH). The formula we used combines your total external recruiting costs with your total internal costs, and divides the aggregate by the total number of hires in a set time period. External costs include everything you pay for outside your organization to make recruiting happen—for example advertising and listing fees, travel costs and job fair registration. Internal costs comprise the salaries of your recruiting and HR team and any additional overhead variables.
Factoring in all of the above, the average CPH is $4,129. That may sound insignificant—until you start looking at turnover rates. Across industries, it’s normal to retain about 83% your workforce every year. But that’s just the average; turnover rates can vary drastically by industry and department. Members of the auto industry experience a 39% turnover rate and, moreover, the turnover rate for sales departments is 72%.
So, if you’re an auto dealer and you have 25 salespeople, you can expect to replace 18 of them each year. Multiply 18 by the average CPH ($4,129), and that’s close to $75,000 spent on turnover within one department alone.
If that weren’t striking enough, keep in mind that we’re only talking about the cost per hire. The cost of not only hiring but actually replacing someone ranges from 50–60% of an employee’s annual salary, and can go as high as 90–200%.
Feeling lost among all this math? Let’s make it more tangible. If 39% is the average turnover rate, a typical auto dealer will have to hire 25 new people every year. Estimating the cost of replacement at 90%, it turns out that an average-sized dealer would need to sell about 1,200 cars to cover the cost of the new personnel.
Wouldn’t it be nice to keep all that money—and, better still—retain top talent?
The Cost of a “Good Enough” Workforce Compliance Program
Recruitment is only one part of a larger equation. Another area organizations are hemorrhaging money due to a “good enough” program? Penalties and lawsuits that result from inefficient and ineffective workforce compliance.
- $33,000: the average cost of discrimination litigation, per settlement
- $44,500: the average cost of sexual harassment litigation, per settlement
- $16,000: the penalty for violating the Do Not Call rule
- $75,000: the penalty for the first violation (it exponentially increases each time thereafter) of the Americans with Disabilities Act
- $7,000–70,000: the penalty for an OSHA violation
- $10,000: the penalty for violating the Gramm–Leach–Bliley Act
These are minimum amounts you can expect to pay for lawsuits and violations. The regulatory fines organizations pay in practice can be much, much higher. As you probably know, the CFPB recently fined Wells Fargo not $10,000, but $185 million for creating accounts in customers’ names without those customers’ knowledge.
Still, despite the obvious impact on the bottom line, organizations continue to adhere to manual, expensive and error-prone recruitment and compliance programs. If you’ve been settling for “good enough,” at least you’re not alone. A whopping 95% of companies admit to recruiting the wrong people each year, and countless companies have insufficient compliance programs.
Fortunately, regardless of all these staggering statistics, it’s possible to fix a pattern of mistakes. Learn how by viewing the archived webinar.
Watch the On Demand Webinar
Calculating the Cost of “Good Enough”
