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Posts Tagged ‘lean six sigma’

The question of whether to use an employment agency or do your own hiring in house can be a difficult one for the mid-sized business. Generally small businesses do all of their hiring in-house and large business will use recruitment companies. That leaves the mid-sized business that must evaluate the value of their time versus money to decide if switching to agency hiring is the right move for them. In order to make this decision it is necessary to understand the true cost of hiring.

To understand the true cost of hiring you need to look at three areas. These areas are the recruitment costs, the selection costs and the orientation and training costs.

Recruitment costs include want-ad postings, marketing material (brochures, videos, recruitment cards etc), community outreach and job fair expenses, office supplies and the salaries of your human resources employees.

Selection costs include background clearances (including time for phone calls, faxes, letters and emails), applicant packet materials and the time for preparing them, applicant testing time and materials, applicant screening and interviews, office supplies and the salaries of the human resources employees involved.

Orientation and training costs include the cost of training materials, the cost of any certifications necessary, the new salary and the salaries of those involved in the training process.

After you have the figures from all three categories you should then add them up and divide them by the total number of new hires. This will be the final cost per hire, and the large number will likely surprise you and have you rethinking your hiring approach.

To decide which method of hiring will be more cost efficient for your company you need to take 100% of your recruitment costs and add it to 70% of your selections costs. Once you have that number divide it by the total number of new employees you are looking to hire and you will have the cost per hire. If this is more money then a recruitment agency is charging per hire then it is time to make a switch.

When choosing a recruitment agency you want to be sure that they have a reputation for good work, and turn the recruiting process over to them completely. This will give you more time to focus on training and incentive programs that will assist in maintaining your workforce. You want to be sure that you hold onto the employees that you invest your time training, and the best way to do this is incentive programs. Some incentives that you can try, to little or no cost, include Flex time, extra holiday time, performance bonuses, and relaxed dress code.