What is the true cost of your hiring process?

If you were making an emergency/last-minute hire and had to drop one step from your hiring process, which step would you remove? Why? How much damage would it do to your business – and what could you do to offset that cost? Most people cannot answer these questions, revealing that their hiring process is probably under- or over-engineered for their current situation. Anyone can pad-out a hiring process (just add more hoops for the candidates to jump through!) but trimming it back is tougher.

Hiring process: the goal

From the Finance and Operations (CFO and COO) perspective, the ideal hiring process would cost nothing, have a single ‘perfect’ applicant and take minutes from approving the budget to onboarding. This candidate would then deliver value within seconds of being hired.

 In reality, the hiring process takes time, and the right person rarely becomes available for the right role at the right time. Each role has multiple applicants, which requires a filtering decision – who will get the job they want, and who will go home empty-handed?

Very few roles can be predicted in advance; you never know what each person will bring until after the fact. Will this candidate, a year from now, do something inspired that goes on to save the company millions?

The hiring process is how we deal with this uncertainty; impose order on the chaos, increase our leverage – control our own costs – and ultimately push ‘reality as it is’ towards ‘reality as we’d like it to be’.

Anatomy of a hiring process

A hiring process is built out of stages, with each designed to reduce the number of candidates. The first stage has all the candidates going in and the final stage has one candidate going out; the one you hired.

It is tempting to think of this process as a funnel, with each stage rejecting more candidates, reducing the number entering the next stage, but reality is rarely that simple. Teams that focus on the rejecting aspect tend to make disproportionately more mediocre hires . There are potentially three different things happening during a stage: negative filtering (removing unwanted candidates), positive filtering (highlighting what’s great about an individual), and seeding (adding candidates to the pool). All three can happen at any stage, and you should be ready to embrace the unusual ones – late-stage seeding and early-stage positive filtering – if you want to identify and hire the best candidates.

The art of the hiring process is mostly in deciding which stages you need, what each one should achieve, and whether it’s worth the cost. The craft is then to deliver each stage efficiently and effectively, monitor the outcomes, and adapt it over time. The best companies continuously re-assess the stages and edit them over time (adding, changing, or removing stages) to adapt to changing conditions.

Each stage in a hiring process must be deliberate and effective. If its benefits aren’t clear or are no longer relevant, then it should be removed. 

Standard stages in hiring processes

At minimum, you need a stage that generates candidates and a stage that ranks them relative to each other. The two most general stages that fulfil this are an Advertising stage and an Interview stage. This is your baseline and gives you a minimum cost beyond which you cannot optimise. Everything else exists to improve the quality of the final hire or to reduce the cost of getting there.

Each stage exists on a spectrum, bringing something to the table and taking something else away. Here’s some of the most common stages with a simplified summary of the differences:

Bear in mind: these are generic ratings – you can (and should) have different versions of each stage that will diverge from these ratings, giving you an even wider variety of tools for constructing your hiring process.

Costing the stages

This is where many organisations make their biggest mistake: they look for ‘headline cost’ figures and fail to tally the ‘total cost’ of each stage. Expensive stages are often misclassified as cheap and vice versa – driving otherwise smart hiring managers and HR departments to make strategically bad decisions that undermine hiring and produce worse overall outcomes than not doing an assessment in the first place..

For example let’s look at the Interview – how much does this cost?

Interview cost:

• Per-candidate: verifying availability, advising on time needed, etc

Per-candidate + per-interviewer: scheduling, co-ordinating calendars for all parties (+penalty cost for any that have to be postponed and then rescheduled)

• Per-interviewer: assessing the job specification and deciding what they’re going to select for
• Per-candidate: compiling all summary info (at minimum: a résumé, but often: a bundle of docs)
• Per-candidate + per-interviewer: assessing the résumé, deciding which items to focus on during interview
• Per-candidate: booking + paying for a meeting room (non-zero operational cost)
• Per-candidate + per-interviewer: attending the interview (including arriving early + leaving late)
• Per-interviewer: focus/effectiveness lost due to being interrupted from their normal work
• Per-candidate + per-interviewer: reviewing notes after the interview and generating recommendations (+ usually generating a written summary, both for legal and operational reasons)
• Per-interviewer: discussing the candidate-pool overall and ranking the candidates after all have been met
• Per-candidate: delivering results (advance to next stage, or reject) and feedback
• Per-candidate: recording results internally (for legal, operational, and performance-monitoring reasons)

…and this is a non-exhaustive list.

For each item, you also have to look at capital expenditures (in a WeWork you may be paying a fixed fee for each hour you use the meeting room), man-hour expenditures (your employees’ salaries that are being used-up), and adding a multiplier for risks / extra costs (if a meeting runs out of time, you’ll have to reschedule, pushing the cost of several stages from 1x to perhaps 1.5x or more).

The list of costs (just for one stage) is overwhelming. It’s not easy! But if this feels too big for you right now, you can join me in trying to create something better. I’m working on a tool that automates the ‘costing’ part and generates actionable insights to improve the process. If you’re interested in trying it, please get in touch.

What does a good process look like?

Your hiring process isn’t static; it exists to serve your staffing and growth needs, and as your company changes, the process should (must!) change too. By defining the process in terms of stages, the company can easily plan and analyse that growth, and then deliver it efficiently by changing individual pieces instead of repeatedly reinventing the whole thing. With this in mind, let’s look at how the process might change for a new startup as it grows from a few employees to teams-of-teams. Each stage is described in concrete terms, and you can see how each one maps to one of the archetypes listed earlier:.

Tech Startup, 0-10 staff:

1. Job advert – $0-$200 – on tech / startups jobsites
2. CV/Resume submission + review – 3-30 applicants per role, 1-5 called for interview
3. Interview (on-site) – with a Founder/Co-Founder – 1 hour
4. Test (code-test for engineers; pitch-deck for marketing; etc) (on-site) – 1 hour

Tech Startup, 10-25 staff:

1. Job advert – $0-$200 – on tech / startups jobsites
2. Recruitment agency contract – 15% commission
3. CV/Resume submission + review – 10-40 applicants per role, 5-10 called for interview
4. Interview (on-site) – 1 hour general
5. Coding-test (on-site) – 1 hour
6. Group interview (on-site) – 0.5 hours “meet the team”
7. Final-round interview – 0.5 hours with CEO/Founder/CxO

Tech Startup, 25-50 staff:

1. Recruitment agency contract – 15% commission
2. Internal Recruiter (outreach) – salaried / contract
3. CV/Resume submission + review – 5-40 applicants per role
4. Screen (phone) – < 0.5 hours
5. Coding-test (take-home) – 3-4 hours
6. Interview (on-site) – 1-2 hours
7. Group interview (on-site) – 1 hour
8. Final-round interview – 0.5 hours with CxO/VP
9. Meet-the-founder Interview – 0.25 hours with CEO

Adapting a process is usually non-linear. In this example we saw that as the size of company increases we see a variety of changes, a mix of additions and removals:

• Some stages are replaced (by more expensive/effective ones)
• The number of stages generally increases (more filtering/cope with more candidates)
• The variety of stages generally increases (each stage becomes more specialised)
• The number of people involved increases (more stakeholders)
• The total time increases (all of the above put together…)

We can’t see cost and outcome here without measuring them directly, but we can see how the overall process becomes more refined (likely to produce better outcomes) in return for increased investment (adding people and stages has increased the cost). If the company is measuring these things as it grows, then the C-suite can make informed decisions about the above processes and easily tweak them towards more/less investment.

Next steps: putting it into practice

First, work out the discrete stages in your current process (or in the process you’re planning to create). For each one, give it a short label and document the resources it consumes: people’s time, specific job roles, external vendors, capital expense, etc.

Second. record what questions your process needs to answer, what information it needs to obtain about the candidates. Are there red-flags you’re trying to detect? Are there specific traits or skills you want to select for? Go down the list of stages and match-up each of these to one or more stages.

Third, improve it. Examine your stages: Is a key trait only covered briefly in a short stage? Is a relatively low-value question being repeated throughout many stages? Is an important item not really being covered by any of the stages? Are some stages providing little or no extra value?

With this informed plan, you’re now ready for implementation.. You know what each stage needs to achieve and why, giving you a guideline for how much time/money you can justify spending on each. If you encounter problems on the ground while hiring, you have a cheat-sheet you can come back to and refresh yourself on why and how each part fits together. If your metrics show something isn’t delivering the value you hoped, you now know to tweak individual stages, rather than throwing the whole thing away and starting again. Or if it works first time and your company grows quickly, you have a leg-up for planning the next phase of hiring: you can easily upgrade the process by adding and replacing stages as and when necessary.

For more detail, check out hirefirst100.com, for my collected knowledge and resources on how to hire the first hundred staff in a new tech organisation.

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