Whaddaya hear, whaddya say? Welcome to episode 26 of the Career Consigliere podcast: your no frills, no BS forum for navigating the corporate job scene. We’re back with you once again for what we hope to be a highly informative and engaging half an hour, or so! Today, we’ll focus on the costs involved in employee onboarding. Yes, onboarding an employee is a TREMENDOUS expense for the average corporation, and we’ll be going through all the ways this usually breaks down, because there are many pieces to it! Why should you care about this? If you’re a job seeker going through the interview gamut and selling your soul for corporate gold, it’s always good to know what goes on behind the scenes on the other side. The more you understand about the hiring process on the company’s end, the frustration of the job search process might come into better perspective for you, and you’ll be able to manage expectations accordingly. Should be an eye opening one today podcast land, letttssss get it!
In the past few episodes about job hopping, I made vague reference to all the costs involved in onboarding. But if I’m going to use it as a way of discouraging you from job hopping, I thought I’d be doing you a courtesy to give you some insights into what these costs actually are, and how it all breaks down. Everything we’re going to cover today comes from an article in Indeed, no question one of the best sources for data on all the latest and greatest in the corporate job scene. I put the link to the whole thing in the episode description for you, so you can check that out on your own time, and I highly recommend you do! It’s a deep article with SO much great information, so I’m only going to be able to give you the highlights here. The article is very structured and covers just about everything you can think of when it comes to bringing a person on board, so we’ll go through the biggies, the major aspects of the process, one by one, and as always, I’ll share some consigliere wisdom along the way. Let’s get into it.
First, let’s assume that the organization enlists the help of a recruiter to find the right candidate. Big time saver for busy HR departments, very common, especially the higher up the food chain you go. As positions get more advanced and niched, it’s often hard to find the right person with an old fashioned Linked-In Search, and God knows that everybody and their 4 cousins apply through the job boards, so the help of recruiters is actually necessary in a lot of cases. But with it comes an expense. No, this service is not pro-bono. Organizations have to pay a commission to the recruiter, usually anywhere from 15-30% of the hired employee’s first-year salary. I’m gonna try and keep all my examples middle of the road here, so let’s say the newly hired person earns a nice round $100K a year, and we’ll assume a 20% commission for the headhunter. We can start the tab right there: bam – the company is $20K in the hole already, and their newbie hasn’t even shown up for work yet.
Now, regardless of whether a company uses a recruiter, they still need to advertise their open position to the rest of the job seeking world. And how do they do that? You guessed it – the job boards. Indeed, which we’re citing in this article is a huge one: that’s the only one I’ll mention since none of the others are paying me, but if you know Indeed, you can probably also name 3-4 others right off the cuff, so you know what I’m talking about. And yes, each one of these job boards also charges you to post: companies pay around $300 per month per posting: that ASTONISHED me. I actually learn a lot when I do episodes like this that require a lot of research, so it’s an exercise for me just as much as it is for you. And WOW! Sweet Jesus – that’s a lot of money for a measly job posting! And if the position goes unfilled for a while, that tab adds up. So let’s say a company is paying $300/month for the posting, and it takes 3 months before the role is filled (that’s about average). They post the job on 3 different boards (also very common practice), so now we’ve got $300 x 3 months x 3 boards, and that’s another $2700 added onto the tab. You’re beginning to see how quick all this adds up!
Next, background checks. If you’re working in corporatopia, you will ABSOLUTELY have a background check done on you before you show up for your first day. It’s a good idea: I could put on my resume that I was Pope Francis’ personal assistant, and I could tell a damn good story to back it up. I’ve seen people lie and exaggerate EGREGIOUSLY on their resumes: gotta admire the moxie, or the arrogance, of some people: haven’t figured out which it is yet. But any company that’s buttoned up is going to want to make sure you are who you say you are, and that you haven’t done anything THAT terrible in the past. But for corporations, this expense is a drop in the bucket. A simple background check starts at about $10, with more advanced ones running north of $100. So let’s go high-end estimate here, and say $100 bucks. No big thang, but we’ll add it to our growing tab.
Another small but increasingly popular fee: testing. More than one of the jobs I’ve interviewed for over the years made me take different types of skills assessments, some of which bore a striking resemblance to the SAT: I’d love to know the predictive validity of some of these tools, I’ve always been a bit skeptical, but who knows: maybe we’ll add that to the list of future episode topics and dig into this further. But as one example, I know some companies are in love with personality inventories: the one I’m most familiar with is the DISC Assessment. I won’t get too much into it here, but basically it’s a pretty straightforward assessment that breaks your personality and behavior styles into one of 4 major categories, which is ideal for getting a high-level profile of someone’s behavioral tendencies in the corporate world. I think there’s a lot of ways in which assessments like this come up short, but I can definitely see where they have their place in taking an expensive gamble on a complete stranger. I’ll stop myself before I go down too much of a rabbit hole here, but assessments like this are usually pocket change for the corporation that hires you: let’s call this another $100 bucks per candidate.
So that’s all the preliminary stuff, but now let’s talk about once the candidate is actually in the door for their first day. They show up dressed all nice, bright-eyed and bushy-tailed, and now what? You have to train them. There is a WHOLE bunch of protocol they have to go through before the “real” work actually begins. At a smaller company this can be done in a single day, or it could be a much more drawn out process that requires multiple days, weeks, or even months! Training in particular can take a significant amount of time, since, depending on the role, there could be specific skill and legal/compliance requirements that a specific person needs. And the costs involved in this could be ASTRONOMICAL! You have not only the costs of running the training program itself, but also the opportunity costs for lost productivity while someone is away from their day-to-day tied and tied up with training. The Indeed article we have here lists average training and onboarding costs anywhere between $1000 and $5000, so let’s go middle of the road again and add $3K to our running tab.
But folks, I’ve seen INSANE money get invested into training. Here’s a real-life consigliere tale for you, quintessential example of this something I’ve seen with my own two eyes. I knew a company that had a “boot camp” style onboarding and training program for their salespeople. The company had very aggressive market share targets to hit, and their plan was to put “feet on the street”, and just sell their brains out. So to do that, they hired about 200 new sales representatives all over the US in the course of 4 years. No matter where the new people were located, their first mission was to spend 2 days in the New York headquarters doing their new hire orientation, meeting the executives, all that good stuff. Then, the actually sales training began, which was held in Chicago. Each and every person, regardless of where they were based, had to spend a total of 5 weeks in Chicago doing live, in-person training. And this company treated you well while you were on the road! Everyone stayed at nice hotels, ate at good restaurants, and a lot of the managers were pretty lenient with expense reports.
Legend has it that somewhere between 2 and 3 million was invested into onboarding and training during that time. Now in that case, it was money well-spent. Not only did the company gain the market share they sought, but it was tremendously beneficial from a camaraderie standpoint. Wanna get close with someone? Go spend 5 weeks in an unfamiliar city with them. Now this is an EXTREME example, and NOT typical at all: most companies would never go to these lengths, but I bring it up just to highlight how expensive onboarding can really be, if you wanted it to.
Back to our tab, next up is the grand daddy of them all: compensation! Now if you’re replacing an employee who left the company, this one is almost a non-issue, assuming the new person will be paid comparable to what the old person was making. But if you’re filling a newly created position, and if we continue assuming our new person is making a Benjamin a year, that’s another $100K on your balance sheet that didn’t exist before. Also, don’t forget benefits costs – 401K match, insurance, and everything else the company pays on your behalf. For now, we’ll just be generous and say $100K all-in. Add this to the tab!
Next, supplies. Everyone in the corporate world gets a computer. And even if they’re a full virtual employee, you still have to hook them up with office supplies, possibly a phone, maybe some special software, and companies that understand ergonomics even let you expense special kinds of furniture that won’t deteriorate your joints quite as fast. Our article here lists a range of $1500-3K for these items, so let’s again go middle of the road and just call it 2 grand.
The final one that we’re going to get into here is what the article calls “employee introduction”. I’m not a huge fan of that term, so I’m gonna call it “opportunity cost”. Basically, when you add a new person into the mix, you upset the dynamics of the team already in place. Even if everything is hunky dory, the newcomer is well-liked, and does a great job, the dynamic of the team WILL change, regardless. And until things restabilize and pick up momentum again, there is definitely a financial cost that comes as a result. Now it’s VERY hard to quantify this: Some companies have really advanced formulas they use, and even this article here puts it as a ranging from a few hundred bucks to potentially thousands. We don’t have anywhere near enough information to say with any degree of confidence what the impact will be, so let’s just call it $1000 and add that as the final line item on our new hire tab.
Oh-KAY! MAN that’s a lot of stuff involved in bringing a new person on. And like we said earlier, that’s not even all that it could be. I left a few things out that I didn’t think were “typical” parts of the average onboarding process, so let’s make some honorable mentions here. Career fairs: if a company goes to one of these types of events to recruit some talent, there are fees involved with setting up a table at the event, plus whatever marketing costs have to go into it: companies at those always have nice brochures, merchandise, sometimes they even have those big expensive branded banners, and that could add up to a few grand before you know it. Next, relocation: If you’re asking someone to move a significant distance from where they’re currently at, that could EASILY run another $20K for moving companies, travel, security deposits, furniture – that’s a whole can of worms in itself. And just to add one more quickie: employee referral bonuses. Lots of companies have programs in place to incentivize existing employees to bring in good talent. Makes a lot of sense! You already work there, you’re already trusted, so they’ll take your word if you vouch for someone on the outside. And your word, in a lot of cases, could be worth up to $5K, according to our article here. Also, signing bonuses: if a company offers you an incentive to join, that could be another 5-20% of the base salary that the company has to put out up-front.
But all the peripherals aside: let’s focus only on the big 8 that we mentioned earlier: here’s what we’ve got, all based on a hypothetical person making $100K coming in off the street:
- Recruiter commissions: 20,000
- Job posting fees: 2700
- Background check fees: 100
- Testing fees: 100
- Training: 3000
- Annual salary/benefits compensation: 100000
- Supplies: 2000
- Opportunity cost: 1000
Ladies and gentlemen: the corporation has just committed to spending $128,900 before their shiny new employee has even walked in the door. And I PROMISE you, this is a conservative estimate. It’s very, VERY hard to quantify some of these things, and even the things that ARE quantifiable can vary so widely that it’s almost impossible to say for sure what the true cost of onboarding will be. But $100K is a very average salary out there in corporatopia, and the main takeaway here is that it costs MORE than the annual salary just to get someone in the door. Better hope they turn out to be stellar, because if things don’t work out? Guess what: we’re right back to square one, and the company starts the spending frenzy ALLLL over again!
So why do I tell you all this? Why should you as the jobseeker, or the casual peruser of the job boards, or the incumbent employee who’s as happy as a pig in crap with their current job care about this? Let’s answer that with today’s......consigliere call to action. As much as I hate to say it, the job market has a very “us and them” mentality to it. There’s you, the jobseeker: you’re looking out for #1, and all you care about is landing that next role: whether it’s for financial reasons, for self-actualization reasons, for bragging rights, or just because you’re bored and want something to do for 40-50 hours a week. Whatever the case, when things don’t go your way, it gets FRUSTRATING! Then there’s “them”: the company that’s doing the hiring. When interests are conflicting, it might start feeling like they’re out to get you, and it might put you on the defensive.
But with the RIDICULOUS money involved in today’s onboarding costs, can you understand why a company is going to be picky? Look, not every company is a publicly traded tech giant with money overflowing out of the toilets. That’s who we hear about in the news, but I promise you, that’s a small percentage of the corporations out there. A lot of companies struggle just like the average person does. The behemoths can take a 6-figure hit if they make a bad hire: the money will be back tomorrow once the stock exchange opens again. But imagine a small, private company? If a new hire doesn’t work out after spending all that money, they might have to let someone ELSE go just to get back where they started. You’d hope a company would be robust enough for stuff like this NOT to happen, but sadly it does.
So can you understand why they’d put you through multiple rounds of interviews? Why they’d ask you really hard questions? Why it might take days or weeks between communications? Now remember, I’m on your side: In past episodes I’ve told you all about how to prevent companies from disrespecting you during the interview process, and I’m not switching sides here. But what I AM saying is that it’s not always done out of malice: lots of times, they’re just talking to multiple people to make sure they find the RIGHT one, or at least the one who’s least likely to dip out after 3-4 months because things didn’t work out.
And even if you’re not currently on the job market? Things can change at any time. A lot of companies are one bad deal, one cyber attack, or one other unforeseen tragedy away from the status quo changing drastically. I don’t mean to sound negative: It’s my most sincere hope that all of you listening are working somewhere that’s stable, secure, profitable, and well-managed. But should things change on a dime, you’ll want to be up-to-date and prepared for what to expect if and when you find yourself back on the job market. And the first step to that is understanding what goes on behind the scenes so you can know what you’re getting into ahead of time.
Sadly folks, that’s all the time we have for today. But have no fears, and shed no tears, because I’ll be back with a new episode very soon. As they say in the industry: no listeners, no show, so do me a favor, and stay loyal! If you find value in my content, please leave me a nice review, tell all your friends, and don’t forget to like, subscribe, and follow on whatever platform you use to get your podcasts. Beyond the confines of your headphones, speakers, TV screen, or any other crazy contraption with the ability to stream audio, I also provide one-on-one career assistance, so visit my website at career-consigliere.net to learn more about me, book me for a private consult, join my email list, or explore some of the other career services I offer. And to all of you out there in podcast land, remember this: Who’s the boss in your career? You, nobody else.
