So how much does a poor talent decision really cost?
Oxford Economics in a 2014 detailed study across five key sectors (IT/tech, accounting, legal, media/advertising and retail) calculated that the loss of an employee earning an annual salary of £25,000 has an average financial impact of £30,614, ranging from £20,113 for retailers to £39,887 for legal firms. These costs take into account the impact of lost output while a replacement gets up to optimal productivity as well as the impact of recruiting and absorbing a new worker. (The Cost of the Brain Drain (2014) – available at www.oxfordeconomics.com)
The Recruitment & Employment Federation and Indeed (a leading UK job search engine) on the other hand published a study in June 2017 where they calculated that a poor hire at a middle management level salary of £43,000 could end up costing a business up to £132,015.
An enterprise with 30 employees that decides it wants to develop an area of its business in order to generate an additional £150,000 of turnover with net profit of £10,000 in the first year.
It looks to hire a person at a salary of £32,000 plus NI to lead the project and promotes 1 person internally to support them for a salary of £25,000 plus NI.
It advertises online for both positions (the new one and the one that has opened up due to the promotion) using a standard job description and receives 20 applicants for each job and decides to interview 4 for each position. They have a 2nd interview for a shortlist of 2 before offering the two positions.
Two desks are allocated in their office for the two new positions and computers are purchased.
Both people have a 1 week induction under the supervision of the COO. The leader’s job is reviewed after 1 month and 3 months by the COO.
The promoted member of staff resigns after 4 months. The COO voices concerns with the CEO after 3 months so the 6 month review involves the CEO after which the leader is given a month’s notice for non-performance.
It’s decided to close the department
They were simply the wrong person in the wrong place at the wrong time.
No less than the following:
As an exercise think of an occasion when you have ended up with the wrong person in the wrong place at the wrong time and allocate a cost under as many of the headings set out in the above table as you believe relevant.
How do this figure make you feel?
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