According to new data released by Omni RMS, a professional organisation for HR and development, and the CIPD (the professional body responsible for people and human resources), organisations waste a lot of money with ineffective strategies when it comes to hiring and retention.
In the latest Report on Resourcing and Talent Planning, it is revealed that less than one quarter (24%) of organisations are measuring their return on investment. Less than a third of organisations that track data on turnover calculate the cost of turnover.
Omni RMS says that this lack of analysis can cost companies up to £100 000 per year. Omni’s Recruitment Cost Calculator shows that an organization hiring 100 employees annually could lose up to PS500,000 in hiring and replacement costs. This is based upon a turnover rate of 34% and an average salary of PS35.500 for permanent staff.
According to the report, 32 percent of businesses in the private sector plan to increase their recruitment budgets to address the ongoing shortage of skills. This could potentially lead to an even greater financial inefficiency in the hiring process.
Inefficient hiring costs you money
Louise Shaw commented on the results, saying “It is astonishing that so few companies track the return on their investment in recruitment activities.” Most organisations spend the most on their people. Failing to monitor and track where inefficiencies have a negative impact on budgets can be a major problem.
The cost of an incorrect hire is not limited to recruitment costs. This can also affect the performance of your business and team morale, which could increase attrition. This puts further pressure on budgets in order to replace the lost talent. Organisations must track the success of their hiring activities. If there is a high level of turnover, they must identify the inefficiencies that are occurring during the hiring process – whether it’s with how they select, attract or onboard.”
Research shows that many organisations do not have the skills or technology to collect data other than traditional metrics. Shaw says that this approach is not enough to address long-term problems, especially when businesses are experiencing high turnover. She also said that businesses waste money on skills shortages, without addressing the problems in their hiring process.
In response to the ongoing skills shortages, 32 percent of private-sector organisations expect to increase their recruitment budgets in this or next year. These companies could end up spending more money on hiring without improving results if they don’t address the inefficiencies of their current hiring process.
