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Hiring Can Be Expensive, Whats The Cost of Negotiating? – By George Stragand

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Author George Stragand – Application Development Leader at OpenScan

The cost of hiring is high.  Adding up all individual resources involved in the process at a typical company and the hours spent lining up an interview can be frightening.  Recently, it is very in fashion to have large team interviews in either a panel or sequential interviews with various resources at different levels to avoid hurting any single individual resources’ feelings of empowerment and to make sure that the whole interview process includes at least one round of Kum-By-Ya !

Just setting up one interview can easily cost at least 2 hours of time from an H.R. resource, 3 hours of the hiring managers time and 4 or more hours of individual team resources for the interview itself and another hour of all the interviewers involvement to recap, make sure everyone’s feelings are validated publicly and then come up with a decision to make an offer.  Assuming an average salary of $100,000, each hour that was spent on arranging and performing the interview costs at least $52 and using this assumption, adding up all the time spent to interview and not including the fully loaded costs of all the resources, one candidate costs over $750!  This figure doesn’t bring into consideration facility costs, or lost productivity on a project but it is a nice round number to use as a working assumption.

Just the interview is expensive.  If a candidate is brought in, then there should be a high probability that an offer will be made.   Considering how fast candidates “go stale” and could receive another offer, there is not a lot of time to waste deliberating and discussing candidates.  If the position involves some hot technology du-jour, there is a good chance the candidate is talking to another company as they are driving home from the interview.

If an offer is made, then another round of activity is kicked off as H.R. reaches back out to contact the candidate and explain the offer and email or fax copies of the offer letter.  If the candidate does not provide an immediate positive response, there is a good chance that they are awaiting other offers or have additional interviews lined up.  More time is spent, at least in H.R., to call the candidate back and check on progress.  If it turns into a counter-offer situation, then more time is burned negotiating.  All the while, the position is empty and work isn’t getting done.

Clearly hiring is expensive, and the negotiation isn’t going to make it any cheaper.  One position is to take a hard line and say no to negotiation, sure that works, and then you go for another round of interviews spending more money to line up another interview.  Remember, each interview is costing $750.

Say the perfect candidate has been identified, and an offer is made but the offer is under the salary that the candidate will accept.  What happens next?  It is an all hands on deck sales pitch to convince how great working for this company will be?  Is the answer always no to negotiation?  In a case where the candidate is wildly out of line with the budget and an honest salary range for the position is well known, it may be OK to reject negotiation.  But what if the candidate is asking for just a little over the offer?  Assume the candidate came back with requesting $5K/year more than the offer.  If it’s within the budgeted range, the hiring manager may decide to pull the trigger and match the request.  The real problem is, what happens when the candidate is asking for $5K/year more and it exceeds the budgeted range for the position?

This situation puts the hiring manager into a quandary.  To run it up the chain of command could take several days, and when the negotiation involves a candidate with the hot technology du-jour, that action is risking losing the candidate if they get picked up by another company.  If the hiring manager pulls the trigger to exceed the budget, they could be putting their own job in jeopardy.  If the counter offer is rejected, then the situation is still in a steady state and the only loss has been lost time.  But what is $5/year if the candidate has the skills, and passing means four or five more interviews at $750 per interview?  The money is spent, somewhere, on some department anyway and a project makes no progress in the meantime.  Five more rounds of interviews is another $3,750 spent; suddenly that $5K/year doesn’t look so bad in this perspective.

Don’t assume that every negotiation is accepted for other factors are in play.  Consider the technology: is it hard to find the experience or is it a commodity?  Is the position long-term and could the salary be adjusted next year?  Is $5/year really out of whack with the current team?  Are the current market conditions really understood for the skillset?  If any of these are unknown, then some work needs to be performed before getting serious about hiring.  These are just some of the difficult questions that a hiring manager must deal with, and why they get paid what they get paid.

When faced with a negotiation carefully consider the entire situation for the cost of not negotiating could be at least equal to the request.  In the end, work needs to get done and chest-thumping by blindly rejecting any negotiation isn’t getting work done.

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George Stragand

About George Stragand

George Stragand - Application Development Leader at OpenSpan