The Business Cost of An Overly High Hiring Bar

Over the past year, as budgets have tightened up, we've noticed an interesting trend in the hiring world - companies are on the hunt for candidates with a broader array of skills and expertise than ever before. Two or three years ago companies might have hired two developers, whereas now they seem to want one who can do more.

It's understandable. The money was free-flowing at 0% interest rates, so why not, but times have changed and we've seen companies set super high standards for candidates, which ends up costing them big time, both in terms of time and money.

I wanted to work out an actual business metric on cost and time, based on the information we've got directly from the market.

We've reached out to a few Principal Engineers to gauge how much of their time is taken up when interviewing candidates, and it's clear that it's no small commitment.

On average, they spend around 3 hours per candidate; an hour for interview preparation, an hour conducting the interview, and roughly another hour for note-taking, discussions with colleagues, and moments of reflection.

A recent eye-opener came from one of our clients, who informed us that they had interviewed 43 candidates for a Senior Software Developer position.

During our conversation with them, they revealed that out of the 43 candidates just under half progressed to the technical round, but were ultimately turned down.

So, if we consider that 24 candidates were rejected after the initial screening and first-round interviews, and the remaining 19 made it to the second round or technical review (resulting in two interviews per candidate), that totals 62 interviews.

Let's crunch some numbers! Assuming their Principal Engineer earns €120,000 annually, that's around €10,000 per month or €62.50 per hour.

With their Principal Engineer investing 3 hours per interview at €62.50 per hour, the total cost for these 62 interviews amounts to €11,625. That's over a month's salary spent on candidates who didn't make the cut, not to mention the 186 hours diverted from working on business-critical projects.

That's a pretty staggering cost, both in time and money, and I’m sure they would agree that more of that time could have been spent elsewhere!

So, what's the bottom line?

Well, it's clear that while aiming for the best talent is vital, companies need to be mindful of the costs involved in setting excessively high hiring bars. As budgets tighten and resources become more precious, finding that sweet spot between quality hires and cost-effective recruitment becomes increasingly crucial.

By reevaluating hiring processes, leveraging recruiters (not biased here at all ;) ) when needed, and being realistic about candidate expectations, businesses can streamline their recruitment efforts and ensure they're getting the most bang for their buck. Finding that balance is key!

Disclaimer: Your process might be shorter, your Principal might only meet with a candidate once etc. The idea behind this post was to give you the tools to calculate your own business cost of looking for that unicorn or setting the bar too high. If you’re in the rapid scale phase this cost might add up pretty quickly on multiple hires.