Magazine article Workforce

Cost per Hire: Don't Even Bother

Magazine article Workforce

Cost per Hire: Don't Even Bother

Article excerpt

We must find out what he's worth. That's what Texas Instruments said as one of its top techies was being wooed by a recruiter working for a competitor. TI, one of the world's great chipmakers, added up all the ideas that the employee had generated for the company, and what that was worth in terms of patents.

TI decided that the employee was probably fairly valued at about $25 million. Yes, $25 million. The company also decided it was worth its trouble to get the employee to stay. TI gave him a nice amount of stock, structured in a way that provides an incentive to stay another decade. Also, TI arranged for a week of private golf lessons for him and his wife at a famous golf resort.

If employees are so valuable, it's silly to spend time and money trying to decide whether we should shell out $1,200, or $1,2000, or $30,000, to source and potentially relocate an employee. Measuring these expenses occasionally can be worthwhile when hiring large numbers of employees with similar skill levels. Usually, though, the whole exercise is a joke.

John Sullivan, one of the leading recruiting experts in America, has little interest in cost per hire. Instead, he spends his time helping companies make calculations like TI's.

Think about it, Sullivan says. If you were going to buy a steak, would you compare the cost of one at Denny's to that of one at Morton's? Of course not: the products are very different. And you'd buy one at one point and the other on a different occasion.

If you were getting brain surgery, would you compare its cost with that of a less complex, more standard operation? No. You'd just do whatever you could to get the best. Is a $1,800 laptop the same as a $500 laptop? No. You pay more, you get better quality. You cannot compare the price of two items and not compare their value.

Pamela Ferrell combs the entire world for people Texas Instruments can hire. She says the organization doesn't keep track of, or care, what it spends to hire someone. Her team recently stole an employee from an Israeli competitor, racking up relocation costs and spending money to fly him across the world for interviews. "Nobody gets paid what they're going to bring in," Ferrell says.

Employees are such a bargain, and hiring costs are such a small percentage of an employee's value, that fretting over the cost of a hire is like agonizing over whether the gumball machine will give you seven or eight gumballs for a nickel. …

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