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Human Resources & Talent

The True Cost of a Bad Hire: A Business Case for RPO

By a Verblio Writer

(915 words)

Traditional thinking has always been that high employee turnover was strictly a management problem. This often led organizations to offer higher wages or implement programs designed to increase employee satisfaction. Research suggests, however, that isn’t the fairest and most accurate assessment.

According to The Harvard Business Review, as much as 80 percent of all employee turnover is due to poor hiring decisions.

There are the obvious financial implications associated with losing an employee during the first 18 months of employment plus many other, non-monetary costs. Fortunately, new solutions exist to help companies, of all sizes, make better hiring decisions and streamline HR processes through recruitment process outsourcing.

The Financial Costs of a Bad Hire

How much does making a bad hiring decision cost your organization? The Department of Labor estimates the amount to be roughly equal to 30 percent of that employee’s salary their first year. CareerBuilder data shows that 41 percent of the employers they surveyed admitted that each bad hire costs as much as $25,000, while 25 percent believed it costs them at least $50,000.

These figures don’t even take into account the non-monetary losses such as damaged reputation, declining morale, and overall loss of productivity. Research by GlassDoor indicates that a bad hire can negatively impact the company culture as well, causing widespread employee disengagement.

The Crippling Non-Monetary Costs of a Toxic Employee

You have worked hard to create a great company culture. Your employees are engaged. They work with passion and you know they feel profoundly connected and loyal to you, the company, and its mission. You have carefully assembled this team and you are confident they will bring innovation and drive your enterprise forward.

When things begin to shift, you hardly notice. Soon, though, your once engaged employees start to slack. They seem “checked out” and disconnected. Lately, they are not just unhappy at work; they are busily acting out that unhappiness by sabotaging the productivity of their co-workers. Morale isn’t just dropping: it is plummeting, and you have a real problem.

Experts warn this is what can happen when one bad apple makes it through your hiring process —someone whose vision never actually aligned or one whose expectations were unmet. The viral spread of a disgruntled unsatisfied employee’s attitude is so insidious, that it can infect your workforce with disengagement. These toxic hires can pose a danger to any organization.

What is Recruitment Process Outsourcing?

Hiring isn’t easy. Even the most seasoned human resource professional is occasionally fooled. For those companies unable to staff a full-time HR department, these mistakes happen even more frequently. It is no surprise then, that enterprise is turning to a unique recruiting concept called RPO.

RPO, which stands for recruitment process outsourcing, is a type of business process outsourcing where a company turns over all or part of its recruitment activities to an external third-party provider.

The firm works directly with you or your team to develop a clear and comprehensive hiring strategy. The goal is to create greater accountability throughout the hiring process from recruitment through onboarding, which ensures that expectations of the prospect and management are both reasonable and attainable. The result is a more efficient process with quicker fill times and decreased hiring costs.

How RPO Works

The process will vary according to the provider and the amount of HR that is being outsourced to them. However, the following guide represents the most common arrangements between a small to medium-sized business and an RPO provider.

Steps in the Pre-Hiring Phase

  • Design a custom recruitment process and comprehensive hiring strategy.
  • Collaborate with you to develop an employment brand.
  • Establish both general and specific hiring criteria.
  • Develop best practices for future HR processes.
  • Begin the recruitment for each position, including all research, data mining, job postings, marketing, headhunting, and procurement of talent from colleges and universities.
  • Find key candidates for your most critical roles.
  • Conduct initial phone interview.
  • Ensure that the basic hiring criteria are met.
  • Conduct any applicable background checks and testing (drug screening, personality testing, behavioral screening, etc).
  • Perform interview preparation if indicated.
  • Utilize video and other remote meeting technology. Gather feedback from management and prospect.
  • Provide feedback to both parties post-interview.
  • To further the employment brand and company culture, the RPO team will provide support throughout the hiring process.
  • Facilitate a positive candidate experience.

Steps in the Post-Hiring Phase

  • Conduct market research to determine salary norms.
  • Negotiate and extend offers.
  • Complete background checks, testing, and complete all HR and benefits enrollment paperwork.
  • Schedule or provide any training that is required before starting.
  • Provide a six to eight-week workplace assimilation plan.
  • Conduct a post-interview with the employee to assess progress, answer questions, and assure all parties are meeting expectations. 

Is Cloud-Based HR & RPO Right for You?

Due to an ultra-competitive market, the recruitment process has become more complex and sophisticated. Companies seeking to differentiate can now develop and run their HR processes and recruitment infrastructure from the cloud through RPO. This is especially important for companies that are unable to staff a full-time HR department.

Technology has made it possible to find and obtain the best talent, regardless of the location—theirs or yours. If your company is doing a large volume of hiring, needing to compete in the current “talent arm’s race,” you will want to consider partnering with an RPO. Find a firm that is positioned to help you by finding the best talent, reducing your bad hires, and eliminating the risk of toxic employees.

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