The Hidden Costs of Entry-Level Hiring

High turnover eats into business profits. Follow this advice to attract entry-level hires and retain them for longer periods of time.
entry level hiring

The cost of recruiting and hiring is well documented and growing. According to one estimate, replacement costs for frontline workers earning as little as $30,000 per year equate to some 16 percent of their annual salary. And as the labor market tightens, the cost of churn is wreaking havoc on businesses that rely on frontline and middle-skilled workers to deliver for consumers.

What’s worse, turnover costs are often underestimated, failing to account for the indirect costs incurred in the process. While most benchmarks include costs like advertising and marketing, recruiting, training and background screening, they rarely account for the sort of non-HR time and effort that goes in to hiring that makes entry-level recruiting an inefficient process — especially for small- and medium-sized businesses without a substantive human resources department or a well-defined recruiting function.

In recent years, I have heard from a growing number of companies grappling with this issue. One client’s CFO complained that his executive team had spent quality time with more than 50 candidates to find the four entry-level hires they had made in the preceding five months. The cost of these business leaders’ time, including lost productivity, was massive.

Even after spending many hours screening, interviewing and following up with candidates, the process often needs to be repeated. Not only do most entry-level hires leave the company within two years (estimated to be approximately 70 percent), but candidates in a robust hiring economy are apt to receive multiple offers and may surprise prospective employers by turning down an offer at the last minute.

A growing number of companies of all sizes are working to control entry-level hiring and recruiting costs by implementing a more efficient process. They’re reorienting their focus around general skills instead of role-specific skills. Rather than recruiting for a specific position, businesses can recruit more broadly with an emphasis on culture fit, core competencies and longer-term upside, thus develop a deeper candidate pool of high-potential entry-level employees that are more likely to be retained over time.

Using an authentic, emotionally resonant company “voice” and tone in job postings is another way to attract entry-level candidates, many of whom are instantly turned off by corporate speak. By focusing a recruiting pitch on the values that matter most to entry-level candidates — mission, vision, work-life balance and growth potential — companies can position themselves as a destination for emerging professionals seeking a future career instead of simply filling an open role.

Small- and midsized companies without considerable bench depth or a sophisticated hiring and recruiting function may consider third-party recruiting as a cost-effective option. Firms that specialize in particular hiring areas, such as high-tech, entry-level or management recruiting, can help smaller enterprises be more adept at identifying and hiring the right candidates, improving retention and establishing a positive reputation that will attract future talent.

Talent is an investment, and in the case of entry-level hiring, it’s largely an investment in an unknown and unproven commodity. While this can be daunting for businesses, there are ways to reduce the investment while not sacrificing longer-term outcomes. By having a sound hiring strategy and leveraging internal and/or external recruiting resources, employers can move toward a more painless hiring and recruiting process that will be leaner, more productive and more rewarding for both the candidate and the hiring company.

Brian Weed is CEO of Avenica, a Minneapolis-based national career matchmaking firm specializing in entry-level recruitment and hiring. To comment, email editor@talenteconomy.io.