$60K – The Real Cost of a Bad Hire in 2010

Middle management figures revealed


The real cost of a bad hire in 2010 has been revealed – a conservative estimate of a frontline / middle manager leaving after three months is $60,000*, according to world leaders in talent acquisition, Futurestep.  “The calculation gets increasingly complex (and higher) when the roles of more senior staff, managers, sales staff or account managers are considered” said Matt Dale, Head of Consulting at Futurestep.

“Many organisations only think of the direct costs associated with employing staff; such as advertising and agency fees. There are also indirect costs like the HR/recruitment team, hiring manager time, technology costs, induction costs and the loss of productivity while they get up to speed. Then there is also the costs incurred if a new hire leaves within their first three months, as commonly happens with bad hiring methods. The firm then has the opportunity costs of having an empty chair, when in many sectors, the market is turning.” added Mr Dale.


The trick to cutting this cost of turnover lies in an organisation’s approach to this increasingly complex arena. In some instances it makes sense to pay a specialist to fill a really difficult role. In other instances, the solution lies in how the company actually goes about recruitment and structures its recruitment team.  In all cases though, it starts with having a clear understanding of the real costs of recruitment.

A large business supplies organisation in Australia is one of many such organisations that had high turnover and found it difficult to measure the cost of recruitment.  By moving from a decentralised model to an outsourced partnership with Futurestep, they gained a deeper understanding of how they need to recruit, reduce turnover and better control recruitment costs. In the last year alone, they saved an estimated $2 million dollars whilst continuing to grow their business and recruit over 500 people.

“Yes, recruitment looks expensive when a company engages a recruitment specialist, but it is far more expensive in the long run to keep going with a broken system. Organisations need a dual approach.  Important vacancies need to be filled quickly and with the right person. In parallel to that, organizations also need to fix their overall system and processes. This approach is tactical as well as strategic, a bit like the surgeon that fixes the critical injury, but also works with the other health professionals to make the patient healthier in the long run, and does not get sick again”, says Mr Dale, “this is where it really does make sense to consult experts in talent acquisition.”

* Figure based upon Futurestep client data encompassing 50,000 employees. July 2009-July 2010

Cost of hiring case study – Sara Lee

Sara Lee is one company that has recently decided to take a more strategic approach. Michael Whitlow, Human Resources Director, said that “although Sara Lee had an effective centralised and internal recruitment model within the business, our organisation is keen to take its sourcing strategy to the next level by maximising the use of leading edge recruitment technology (Taleo) and integrating best practice approaches to sourcing into the business.  We are very keen as a business to build on our strong consumer brand by enhancing our employment brand in the market place.”

Michael Whitlow outlined that by investing in a partnership with Talent Acquisition firm, Futurestep, he can focus his HR team on other, critical business issues. Mr Whitlow commented “bringing in Futurestep to manage our recruitment function will give us access to cutting edge recruitment professionals, processes and systems.”

Challenges facing Sara Lee:

  • Diverse range of roles across multiple and remote locations
  • Limited ability to innovate in the sourcing of high quality talent
  • Lack of recruitment technology to automate the process & create efficiencies
  • Inability to obtain sophisticated metrics and therefore report on meaningful measures of success
  • Lack of benchmarking against industry or global best practice


Advantages of the outsourced model:

  • HR team can focus on developing talent
  • Flexibility/ scalability to changing business needs
  • Speed to market with innovation, expertise & capability
  • Access to leading edge people, processes & systems
  • Consulting expertise to develop employment brand & make Sara Lee a career destination

This article is from Futurestep www.futurestep.com

Other references on the cost of a bad hire:



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