The cost of lost opportunity in recruitment

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by Fhiona Lamb

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01.11.20

The cost of lost opportunity in recruitment
Uncovering the impact of recruitment on the bottom line

We’ve all heard the saying “time is money” and that could not be more true. Especially in a COVID19 world.

It’s great to see that companies are hiring and growing their sales team again. However, with hiring comes costs and typically we only think about the monetary value. I.e how much does the successful candidate want for the package? What we don’t think about is the cost of lost opportunity when hiring. 

Oxford Dictionary’s definition of the cost of lost opportunity is “the loss of potential gain from other alternatives when one alternative is chosen”. In other words, any time you make a decision, there is a trade-off.

Let’s put it into action.

The more time Sales Directors, VP of Sales and other Sales Reps are interviewing candidates, the more time they are away from actually selling. In addition to that, having an empty seat due to not finding someone fast enough will result in burnout as the sales team will have to work harder to hit the region’s number.

 

WHAT ARE THE CONSEQUENCES OF LOST OPPORTUNITY WHEN HIRING SALES PROFESSIONALS?

1. Direct Revenue Loss

A slow and cumbersome hiring process can have a negative impact on the bottom line, especially when talking about sales professionals. Let’s use a simple maths example: if on average a sales representative generates $10,000 a month, a position that has been vacant for 3 months has already cost the business $30,000 in lost revenue. Revenue loss also occurs in cases where the winning candidate is snapped up at the last minute by a competitor. This means starting the search and the whole recruitment process from scratch all over again, causing additional delays. As per the above example, quantifying the financial loss is quite straightforward when it comes to sales professionals, with their output being measured in $. However, there are other variables to be considered, such as:

 – Yearly Target
 – Ramp up Time
 – Sales Cycle Duration

This OPEN SALES POSITION CALCULATOR allows to easily estimate the cost of lost opportunity.

2. Candidate Experience and Employer Brand Damage

While it is of course important to focus on hiring the best candidate for the role, time is of the essence. Have you ever heard of the adage Hire Slow and Fire Fast? Not the best advice.

A convoluted hiring process increases the chances of providing a bad candidate experience characterised by delayed responses, lack of feedback to the candidate or even unreturned calls. The cost paid in this instance is not immediately translated in dollars. It is however a reputational damage to the employer’s brand image that in the long run will lead to financial repercussions.

In a world of radical transparency where every product and experience is rated and reviewed, candidate experience is no different. Workplaces are continuously measured on review sites like Glassdoor, so it becomes critical to be mindful of intentionally designing, implementing and reinforcing the candidate journey.

THERE’S MORE TO CONSIDER

In addition to the Opportunity Costs, there is a multitude of other risks brought by a recruitment process that is not lean and speedy:

 – Loss of favorite candidate to a competitor
 – Need to raise the salary offer in order to compete with an existing offer
 – Lower-quality hires, as the top candidates most likely won’t stick around
 – Lower productivity, vacancies as a result of slow hiring will dramatically impact the productivity in individual jobs and throughout the whole team.
 – Overwork and stress of existing staff to fill in the gaps. This leads to errors, lower quality output and possible turnover

IN CONCLUSION

A lengthy hiring process does not necessarily mean you are hiring the best talent, just because you are being so thorough in assessing a candidate’s skills.  Especially in areas, such as Australia, where there is shortage of particular skill sets, time is paramount to win a candidate over and beat the competition.

A recruiter who knows the market inside out, speaks the language (of the industry in question) and with an extensive network of candidates at their fingertips is far more likely to source the top talent in the shortest amount of time.

Lack of specialisation means recruiting for a wide range of roles across the board: from sales, to tech, to marketing. Generalist recruiting is a liability for the business as it increases the chances to hire the wrong talent, with consequences of additional costs for re-hiring, re-onboarding, re-training etc.

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