Why It's Harder Than Ever for Companies to Hire Great People

The front-end costs of recruitment, the hidden internal costs of hiring, onboarding, and training, productivity losses, turnover, the astronomical cost of bad hires (Bradford Smart's Research: In his book Topgrading, Bradford Smart suggests that the cost of a bad hire can range from five times to as much as 27 times the amount of the person's salary. For an employee earning $100,000, this could translate to a cost between $500,000 and $2.7 million, especially at higher levels where the impact on business can be profound.), and the fear and implications of legal and compliance issues all contribute to why it's so challenging for companies to hire great people.

On top of that, the long-term, continuing growth in the costs of vacation and stat holidays, benefit plans, RSP matching, and everything else companies need to do to stay competitive in this market further complicates the process. For instance, according to the Bureau of Labor Statistics, employer costs for employee compensated at $15-$20/ hr averaged $39.61 per hour worked in 2023. That is at least double the wage!!!! This is why it's become so hard for companies to hire great people and why it's even harder for struggling job seekers in the market.

Further compounding things, I believe the reason for the disconnect is that the true business math isn't shared, and it’s not on the business to do this. I personally believe it's on the education system, which means that it's effectively a government issue, in my opinion. But we see people complaining every day that the system is broken, and I don't believe it is.

The Evolving Landscape:

Companies are looking to hire people, and they hire people every single day. But businesses have been forced to evolve their processes because they've made costly mistakes in the past, or even worse, some companies have gone out of business. According to a study by the Work Institute's 2023 Retention Report: They suggest that the cost of replacing an employee can range from 33% to 50% of the employee’s annual salary. For a mid-level position, this could easily translate into a cost per hire of $15,000 or more, especially when factoring in the costs of lost productivity, training, and onboarding. Moreover, companies have evolved, and so have employees. Companies have increased their offerings beyond just salaries, including time off, the technology required to support hybrid and remote working, benefits packages, RSP matching, sick leave, increased stat holidays, and many other expenses. Because of this, the barrier to entry for new employees grows.

Of course, on the front end, there's the cost to post jobs, agency fees, or internal HR and recruiter salaries, referral bonuses, background checks, and just the time and resources spent by staff to review resumes and conduct interviews. A LinkedIn survey found that 70% of talent acquisition leaders say their top hiring priority is improving the quality of hires. Speaking of HR - While on this topic, HR was once a singular person, and now there are 15, 20, or 30 different variations of what HR means to a company. Some companies have had to invest in extensive HR teams with compensation, benefits, DEI, and all these different factors—these are all things that cost companies money and directly impact the profitability of the business. This, in turn, increases the cost of every hire they make, making it harder for new employees to enter the company.

The Investment in People:

Further, companies continue to invest in technology, employer branding, onboarding programs, training and development, mentorship, and support to ensure that they maximize the investment they make in people. A study by Glassdoor revealed that organizations with strong onboarding processes improve new hire retention by 82% and productivity by over 70%. Compound this with ramp-up times to get new employees up to speed, disruption dynamics, lost opportunity costs, and just general productivity losses, and you can see how all these factors directly impact the cost of making a good hire.

Part of the problem is that businesses and people, in general, tend to protect themselves from one-offs. Turnover costs—whether it's severance, lost knowledge, the impact on morale, or further compounded by underperformance, management time spent rehiring costs—are significant. And even further, if you make a really bad hire, you have to deal with legal fees, risk lawsuits, and compliance issues.

The Reality for Companies and Job Seekers:

What employees and job seekers expect of businesses and what businesses expect of employees continue to evolve and change. Companies need to win first; companies need to be profitable. In my experience with the over 1,000 companies in Vancouver that we've worked with, for the most part, they just want to hire great people. They want to hire, and they haven't built extensive, costly processes with extensive, costly HR teams just for fun. It's because they want to win, they want to protect the business, they want to be profitable. And when they do hire people, they treat them as amazingly as they possibly can, even though the goalposts on the employee expectation side keep changing. And that's not the employees' fault—it's just the reality.

Companies want to hire great people, and job seekers just want a company to give them a chance, but it's not that simple—and this is why.