If you are wondering whether to engage a professional executive recruiter, turn the telescope around. Stop thinking about how much it will cost if you do and start calculating the cost if you don’t.
We’re talking risk here, and in the pay now or pay later game, later always costs more.
The chances of making a hiring mistake are likely to be higher in-house than if you find and engage an experienced specialist firm. And the costs of making that mistake are deceptive.
Suppose, for example, you are looking for a senior manager at $100,000 a year and suppose a reputable retained executive search firm will charge $30,000. Heavy hit? Not really, when you consider an accepted figure if you have to replace that person, even if you move within six months, is 2.5X salary, or $250,000.
Why? Because you not only go through the costs of finding, testing, interviewing and hiring but also costs of separation, wasted time, possibly lawsuits and outplacement fees.
And if you’re asleep at the switch and leave the mis-hire in place for a year or two, the damage can be frightening, including missed opportunities, eroded customer loyalty and employee morale, separation costs and much, much more.
I’ve seen studies in reputable papers that place this as high as 30X base compensation. Do the math!
What are the odds?
So what are the odds of a mis-hire? With a search professional, really low. Unless you are a dedicated hiring manager in a Fortune 100 firm – and even then – the search firm is going to have
- more and better tools including extremely sophisticated assessment programs;
- strong pipelines of qualified prospects both passive and actively looking
- teams of highly experienced people whose business is getting it right the first time
- and, if it doesn’t work out, most firms have a policy of a no-cost second search.
They will really drill down on fit, which is the number reason for a hire going wrong. And that trumps your “gut instinct”. According to the Harvard Business Review, as much as 80% of employee turnover is due to bad hiring decisions.
But, maybe that’s just other people, right?