Spending Pennies to Save Fortunes...
One feature of corporate life which never fails to fascinate - and deeply depress - me is why so many companies would rather accept the very high probability of a huge loss than make a definite decision to spend a small amount to reduce that risk.
Years ago I was involved in looking at the financial data across MNCs of the costs of failed expatriate assignments - in other words, what it cost if you sent executive X and his family to work in another country and it didn't work out. Even 15 years ago, the average cost of such a failure was around US$150k - and the likelihood of such a failure was better than one in two. Simple training for the executive and his family which was shown to reduce the risk of such failure by (from memory) around 85% cost on average around US$1500 - and many MNCs wouldn't spend that money, EVEN when confronted with the data.
Maybe times have changed in cross-cultural training; there is certainly better awareness of the issues now in MNCs (if not in all of their smaller brethren). But before you sit too comfortably, forget the cross-cultural aspect and think about a much simpler scenario: how much are you spending to determine whether new hires are likely to stay with you long enough to become productive?
Why not work out the cost to you, in time and money, of going through a recruitment exercise and then losing or letting go the person in the first six months? Direct costs in such a case are normally held to be 75-100% of annual salary, opportunity costs comprise lost time (normally the time the person was with you plus three months) and what you could have earned through their work if they had been suitable (which is where this gets more situational). As a guideline, a failed recruitment in a fairly junior position earning no more than £12k could be costing you in the region of £25-30k in direct and opportunity costs. The multiple only increases with more senior positions.
Testing for role suitability and cultural fit, anyone?
Years ago I was involved in looking at the financial data across MNCs of the costs of failed expatriate assignments - in other words, what it cost if you sent executive X and his family to work in another country and it didn't work out. Even 15 years ago, the average cost of such a failure was around US$150k - and the likelihood of such a failure was better than one in two. Simple training for the executive and his family which was shown to reduce the risk of such failure by (from memory) around 85% cost on average around US$1500 - and many MNCs wouldn't spend that money, EVEN when confronted with the data.
Maybe times have changed in cross-cultural training; there is certainly better awareness of the issues now in MNCs (if not in all of their smaller brethren). But before you sit too comfortably, forget the cross-cultural aspect and think about a much simpler scenario: how much are you spending to determine whether new hires are likely to stay with you long enough to become productive?
Why not work out the cost to you, in time and money, of going through a recruitment exercise and then losing or letting go the person in the first six months? Direct costs in such a case are normally held to be 75-100% of annual salary, opportunity costs comprise lost time (normally the time the person was with you plus three months) and what you could have earned through their work if they had been suitable (which is where this gets more situational). As a guideline, a failed recruitment in a fairly junior position earning no more than £12k could be costing you in the region of £25-30k in direct and opportunity costs. The multiple only increases with more senior positions.
Testing for role suitability and cultural fit, anyone?
0 Comments:
Post a Comment
Links to this post:
Create a Link
<< Home