What is the best way to evaluate the impact of a new hire on your business?

1 What is cost-benefit analysis?

Cost-benefit analysis (CBA) is a method of comparing the costs and benefits of different alternatives or actions. It can help you assess the net effect of a decision on your business goals and outcomes. In the context of hiring, CBA can help you estimate the costs and benefits of hiring a new employee versus not hiring or hiring someone else.

2 How to conduct a cost-benefit analysis for hiring?

Conducting a CBA for hiring requires you to identify the alternatives, such as hiring a new employee, not hiring anyone, or outsourcing the work to a contractor or freelancer. You also need to estimate the costs and benefits of each alternative, including direct costs and benefits, such as salary and increased revenue, as well as indirect costs and benefits, such as opportunity costs and improved quality. The net benefit of each alternative is calculated by subtracting the total costs from the total benefits. Finally, compare the net benefits of each alternative and choose the one with the highest net benefit.

4 What are the limitations of cost-benefit analysis for hiring?

CBA is not a perfect tool and there are some limitations that you should be aware of. It can be difficult to measure intangible, subjective, or uncertain costs and benefits, such as the value of creativity, loyalty, or reputation. There is also a potential for bias or error when estimating the costs and benefits of each alternative. Furthermore, CBA is sensitive to changes in assumptions, variables, or data and it may ignore other factors that may affect your hiring decision, such as legal, ethical, or social implications.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?