Why cutting down hiring costs doesn’t make it cheap

man with hiring costs headache employer problemsThe harsh reality of hiring costs– we upset ourselves without even knowing it!

Sometimes we make bad hires because we don’t have the necessary expertise or resources to
ensure robust hiring practices.

I can tell you that there is, in fact, ONE simple reason why bad hires occur.

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Employee turnover costs and how to avoid them

Employee turnover is disruptive, expensive and has both tangible and intangible effects.

employee turnover cost iceberg staff

The cost of employee turnover is like an iceberg.

Like in an iceberg, the tangible effects are visible above the water. Meanwhile, the intangible effects appear underneath, less visible yet often quite larger than it seems.

Staff turnover is more than filling up a job vacancy due to attrition. In fact, the costs exceed the average cost to hire a new employee.


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How a disrupted business became a disruptor!

In my previous article, I described how my recruitment and labour-hire business was disrupted in 4 separate ways and how the fourth stage of disruption, in fact, disrupted the first!

This didn’t help my recruitment and labour-hire business which serviced large national and multi-national clients in the engineering, mining and construction sectors.

In a nutshell, the advent of internal recruitment teams and increased competition for a smaller piece of the recruitment pie, meant shrinking revenues and shrinking margins in all service areas. This created a double whammy. The writing was on the wall.

The solution was defined in the problem itself. We needed to get to businesses that didn’t have the internal recruitment team. We wanted to get to businesses that didn’t have one or more of the people, financial or time expertise to do their own recruitment, and do it professionally and cost-effectively.

We knew that most firms wouldn’t have a recruitment or HR resource until they were some 70-100 strong, and even then many didn’t have the budget to recruit effectively.

We then defined the market as small to medium enterprises (SME’s) which were between 10-199 people in size. To our surprise our research showed that this was a huge market with about 95% of all Australian businesses in the SME category.

We also knew that SME’s were a lot tighter financially in terms of available funds for recruiting and generally, and our experience also showed that the smaller the business, the less breadth of expertise exists compared to a larger business.

Putting this all together, we decided that we had to either transform our existing business, or create a new one. We wanted the new business to:

  • Have very attractive fee structures
  • Be the lowest cost operation
  • Have compelling value propositions for SME’s
  • Be scaleable nationally
  • Deliver great candidates

A traditional recruitment business typically has full time salaried consultants working from leased offices with traditional office infrastructure, cars and car parking costs. Clients are charged high fees (usually 10-20% of salary package). In contrast to this we needed to deliver value to SME’s and this required a whole new mindset involving:

Provide fixed flat fee services

Engaging part-time specialist consultants

Working remotely, connected via cloud

Use the latest in technology

What we also did was analyse all the steps in the recruitment process and measure the activities and costs needed to deliver them. What we found was astounding and enlightening. It was enlightening because it highlighted the huge inefficiencies of “traditional recruitment”. It provided a huge opportunity cut out up to 90% in inefficient methods and previously accepted “recruitment practices”.

With quantum leaps across all aspects of the new business, this meant not only creating a new business but the acceptance of a quantum shift in thinking and a completely new mindset . Enter the belief system, culture and business model that is 1300Hired.

Personally speaking, I have been on a journey to transform myself as leader of one business from “the old school” and into the leader of a new business which is quantum shift from the old ways. It is also hugely disruptive to those invested in the old “% of salary package” recruitment business model. SME’s love us and recruiters hate us.

This has not been an instant transformation, rather it is a deliberate and planned journey towards what I believe will become accepted and mainstream in the future – until the next disruption!