It is more expensive to find a new employee than many accounting teams would like to think. Society for Human Resource Management (SHRM) reports the average cost-per-hire in the US is about $4,700. However, once you roll in lost productivity, manager’s time, and that lengthy ramp-up period until the new hire is producing at full capacity, many businesses are dishing out three to four times of that position’s annual salary. That’s not an expense. That’s a strategic deficit.
The business case for putting resources into your current workforce isn’t about magnanimity. It’s about self-defense.
What Hiring Actually Costs You
Looking beyond the page, you also have to remember that culture fit matters in hiring, and not in an “are you like us?” way, but in a “will we enjoy having you around?” way. Your current staff’s happiness and comfort with a new co-worker is critical to their everyday work experience and productivity. The more a new hire disrupts or irritates the team, the less effective everyone is. Absenteeism, burnout, and attrition all go up. Co-workers spend 30% less time engaged with each other and 60% more time in meetings when they dislike one another.
For all these reasons, a hiring decision isn’t complete until you factor in the months of cost and lost productivity that comes after a new employee arrives, in addition to whatever it takes to get you to that offer letter.
Upskilling as a Retention Strategy
The cost of replacing an employee varies by industry and role, but it’s generally agreed to be higher than the cost of training and developing an existing employee. That math is unforgiving, and the numbers aren’t linear. Losing a specialized team member due to a lack of development hits the ability of three to four other employees to do their jobs, at least in part.
That compounds in quantifiable quadratic style as each of those four underproductive employees becomes three-quarters of a team player, and so on. The lost output cost of one lost employee accrues faster than the hiring, orientation, and training costs of one replacement, particularly for specialized roles.
Where Upskilling Delivers the Fastest ROI
Not every dollar spent on training lands you the same benefit. In general, you get the quickest and most visible return on the training programs that remove existing high-friction problems, rather than those focusing on abstract, far-off improvement.
Business writing might be the best example. Writing already takes up 25%+ of many knowledge worker’s days, and that percentage is still growing. Writing badly is even more expensive. It’s been estimated that $400 billion is wasted annually in the U.S. workplace due to poor writing, and that a third of professional entry-level hires cannot write a coherent paragraph.
Poor writing might be considered a squishy sort of problem, but the costs aren’t. Whether you’re forced to re-read and decipher that report or email several times, or find yourself in endless loops of clarify-discuss-restate, responding to unclear writing costs real time.
Poor writing doesn’t just waste time, in an IP-reliant, regulation-heavy world, it can also put you at real legal risk. Old-school liability, like poorly-worded contracts, is the easiest to understand. But poorly-communicated safety procedures, emergency instructions, intellectual property records, deception of investors due to misunderstanding of records, and not hitting statutory disclosure thresholds for potential litigation may actually be much more expensive.
Specific, targeted business writing training is about the best dollar-for-dollar training you can invest in to relieve that particular source of friction and wasted corporate income. It directly improves the quality of the writing and thus the reader’s grasp of the content the writer is trying to communicate. It’s still not going to turn every writer into John Grisham, but your team will indeed learn how to write better.
Building an Agile Workforce From the Inside
Businesses that make steady, ongoing investments in learning and development end up with something that external hiring just can’t match: an adaptable workforce.
When employees are cross-trained and routinely introduced to new skills, you have a nimble workforce that can react to business shifts without needing to recruit anew every time there’s a gap. If a niche role opens up and the external labor market can’t readily supply the talent, you have internal candidates who are already close. Time-to-fill decreases. The hiring risk that they will not work out decreases with it.
There’s also an employee value proposition angle here that often gets overlooked. Employers of choice (the Glassdoor Best Places to Work crowd) are invariably high-investment-in-L&D firms. They also don’t have much trouble attracting the best when they do need to go external.
Stop Treating Training as a Cost Center
It’s natural to want to reduce L&D budgets when finances become strained. However, that’s not the right approach. In fact, when the cost of external talent is high and unstable, your current team is your best asset.
Viewing training as a cost to be minimized is a mischaracterization of its nature. A focused training initiative for your current team is a strategic investment in a known entity. On the other hand, hiring is an investment in the unproven potential of an external candidate who hasn’t worked in your organization yet.
When you compare the two, the results are not similar at all.
