Organisations are squandering hundreds of thousands of pounds annually due to ineffective hiring and retention strategies. As businesses struggle with skills shortages, many are spending excessively without evaluating their return on investment (ROI). This concerning trend has been underscored by new data released by resourcing transformation expert Omni RMS, alongside insights from the Chartered Institute of Personnel and Development (CIPD).
The Financial Impact of Inefficiency
The latest edition of the Resourcing and Talent Planning report reveals that only 24% of organisations currently measure the ROI of their hiring activities. Furthermore, less than one-third (31%) of those aware of their organisation’s turnover data assess the cost of labour turnover. According to Omni, this lack of measurement could result in significant financial losses. Their Recruitment Cost Calculator suggests that a company hiring 100 employees annually could potentially lose upwards of £500,000 per year in hiring and replacement costs. This estimate is based on an average turnover rate of 34% and an average salary of £35,500 for permanent roles.
Growing Recruitment Budgets Amidst Skills Shortages
The report also highlights that 32% of private sector organisations anticipate increasing their recruitment budgets in the coming year as they navigate ongoing skills shortages. This approach, while intended to attract talent, risks further exacerbating the issue of financial waste unless organisations adopt a more strategic view of their hiring processes.
Expert Insights
Louise Shaw, Managing Director at Omni RMS, stated: “It is remarkable that such a small number of companies are assessing the ROI of their recruitment activities.” Employees represent the largest expense for most organisations, and failing to monitor where inefficiencies lie can have dire consequences for budgets. The cost of a wrong hire goes beyond just recruitment costs; it disrupts business performance and can negatively affect existing team morale, which may lead to increased attrition rates.”
Shaw emphasized the importance of organisations scrutinising the effectiveness of their hiring strategies. “If companies are experiencing high turnover rates, it is imperative to identify inefficiencies within their hiring processes whether related to attraction, selection, or onboarding. Many organisations lack the skills and technology necessary to analyse data that goes beyond traditional metrics like time to hire, which becomes irrelevant when there is a revolving door of staff.”
A Call for Strategic Change
Shaw further elaborated, “At Omni, we see numerous organisations pouring resources into solving skills shortages without truly understanding the underlying issues. This often results in more harm than good. As we begin to see glimmers of improvement in the recruitment landscape, companies must develop talent strategies that allow them to optimise resources, make data-driven decisions, and, importantly, justify their investment.”
Recommendations for Improvement
To counter these challenges, organisations are encouraged to adopt several key strategies. First, implementing comprehensive tracking systems for hiring metrics can provide valuable insights into the effectiveness of recruitment practices. Second, investing in training for HR professionals to enhance their data analysis capabilities will empower them to identify trends and inefficiencies. Third, leveraging technology, such as applicant tracking systems and predictive analytics, can facilitate better hiring decisions.
Conclusion
The findings from the Resourcing and Talent Planning report underscore the urgent need for organisations to re-evaluate their hiring practices. By implementing strategic measures to assess and improve their recruitment processes, employers can mitigate unnecessary costs, foster a more stable workforce, and ultimately lead to enhanced organisational performance. In a competitive market, a well-considered approach to hiring is not just beneficial, it is essential.