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Don't Throw Money out the Window!

Recently, we facilitated a workshop for the Richmond Higher Education Center discussing best practices in hiring. Getting the right people in the right positions is one of, if not the, most important decisions a manager makes.

Depending on the industry, an organization can spend between 40- 80% of its gross income on employee compensation (salaries and benefits). If your new hire isn’t a good fit for the role, your organization is throwing money out the window!

There are many, sometimes “hidden,” costs of hiring:

- time to create the job description - advertising and recruiting - applicant screening - interviewing - hiring and negotiating - onboarding and training

Taking an opening from job-role creation to a new hire walking in the front door can last several weeks and require several thousands of dollars to accomplish.

In addition, deciding to hire someone from outside the organization can significantly increase those expenditures. Organizations can incur heavy costs – up to two times the annual salary of the position – due to lost productivity and reduced engagement:

=> External hires can take up to three years to feel comfortable in their position and contribute as fully as someone already working in the organization.

=> At the same time, internal employees who wanted or applied for the position may be less eager to work with an “outsider” or discouraged that their performance wasn’t considered “good enough” to move up the career ladder.

=> As a result, they may disengage from their work or, worse, spread their discontentment among their colleagues. (1)

Organizations spend thousands of dollars on each hire, gambling that the new employee will prove a good return on investment. That’s why it’s so important to take the time to get hiring right.

When faced with filling a position, ask yourself:

  • Why do we need to fill this position (backfill, expanding role, new function)?

  • Where does this position fit in our overall strategic plan and organizational structure?

  • What skills, abilities, attitudes, or experiences must someone already possess to be successful in this role?

  • How much are we willing to invest in training for this position?

  • Which is more valuable in this role, a particular skill set or an understanding of how our organization works?

By thinking through these questions, you increase the odds of finding the right “who” to meet your organization’s needs. You will boost your organization’s ability to perform while saving both time and money; in other words, you’ll be an excellent manager.


1. Bidwell, M. (2011). Paying for to get less: The effects of external hiring vs. internal mobility

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