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
