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.
|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|
|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