Cost of Poor Selection Decisions

It is often said that making a poor selection decision can cost an organisation up to three times an individual’s salary. Use this formula to help you work out the actual cost of a poor selection decision within your organisation.

Please note, this formula does not take into account the potential loss of business where the individual is in a Business Development or Sales role.

To find out the actual cost of these roles, add in the revenue forecasts for a minimum of 12 months.

Direct Costs

Cost

Activity

Advertising, Job Fairs, Employment Agencies
Screening Applicants including reviewing resumes, answering queries, providing information, tracking data and general correspondence
Selection Process including interviews, testing, referee checks, etc
Travel costs to interview
Relocation costs of successful candidate
New appointee training, induction and orientation costs
Direct Costs Sub-Total

..

Indirect Costs

Cost

Activity

Time spent on interviews
Time spent dealing with poor performance issues
Impact on productivity, morale and motivation of the team
Lost productivity from a vacant position (rule of thumb is six weeks)
Any severance pay, legal costs for Personal Grievance, etc
Indirect Costs Sub-Total

______Total Cost of Poor Selection Decision