Talent Acquisition and the 'Cost Iceberg'.

Before you read on, I want you to take a moment to consider the following question:

When it comes to business decision making, what tools or techniques do you use to measure the cost of inaction??

Business leaders are adept at understanding and quantifying the cost of taking action. There is a clear cause and effect, as well as a financial record that can be used to measure the effectiveness of business decisions. We can say “Decision A led to Outcome B, which cost us $100,000 per year”.

Decision Analysis has existed for a long time, and modern algorithms make it easier to predict what outcomes to expect from a range of options. But often such techniques are only used to scrutinize situations when action must or likely should be taken. An example of this might be when a supplier is downsizing and unable to provide support as they previously did. You could stay put and try to muddle through with a struggling vendor, but you’re likely to consider alternatives.

But what about situations when leaders aren’t even thinking about making a decision at all? Situations where People Leaders assume that what they have is ‘good enough’ can often lead to stagnant thinking and a lack of initiative in looking for ways to improve. There is also an element of risk that by changing from a known to an unknown quantity might make things worse.

Change is often complex to manage, and the risks of getting it wrong and causing an otherwise acceptably performing function to fracture are real. Poor change management and implementation can cause not only reduced performance, but can also act as the catalyst for top performing people to decide it’s time for something new.?

However, if you are only comparing upside and downside of changing, you are only getting half the picture. What are the costs of a Talent Acquisition function not changing at all?

A way of illustrating this is the fact that if a candidate drops out of a recruitment process, the average cost of rehiring another candidate is 49 days and $30,000.

Sounds pretty bad. But it gets worse. What if the following happens to you?

A candidate drops out of a process because they have accepted a similar role at a competitor. They (your rival) now get the benefits of freeing up their TA function from filling a role and get the economic benefit of this new employee. What about the lost benefits of this missed candidate bringing their networks and clients with them? That all now goes down the road to your opposition.

So $30,000 is actually just what you see, the proverbial tip of the iceberg that is visible costs, with the net cost possibly being much higher, as the following scenario highlights.

You are managing a Talent Acquisition function and a vendor representative approaches you saying they can reduce your time to fill by an average of 8 working days. But they are a bit more expensive than your current provider so you politely decline the offer.

You assume that what you have is working to expectations and so there is no need to change. What are the costs of this decision?

Your Talent Acquisition function hires 200 people a year, and has a drop off rate of 20%. Assuming the market average of $30,000 in costs and lost productivity and 49 days to rehire, your TA function has a hidden cost off…

$1,200,000 and 1,960 days in lost productivity.

That is the real cost to the business of not changing or looking to improve. This is the 90% of the iceberg hiding under the water that you don’t see until you have already hit it.?

It is easy to fall into a complacent mindset that if a process is working, it is likely working well. It is equally foolhardy to expect organisations to exist in a constant state of alertness when it comes to process improvement. There are only finite resources at your disposal to allocate to different initiatives; not everything can be the focus all of the time.

But when an opportunity comes to scrutinise a function, platform or provider, remember to consider the hidden costs. Before dismissing an alternative process, look to take a step back and try to visualise the full ‘Iceberg’ of potential cost to your organisation.

How does your business account for the cost of inaction and balance against changing what is working?