A recruitment drive is a great sign of growth. But the potential pitfalls, risks and high costs of hiring represent a loss to balance with the talent gain. The costs of new recruits chiefly fall into the below areas.
Shortlisting candidates to interview
Recruitment agencies offer a useful option where HR resources are limited, delivering candidates ready for interview. Recruitment agencies offer a useful option where HR resources are limited, delivering candidates ready for interview. But demand for developers has allowed agents to charge more than 20% of annual salary1 - coupled with a rise in salaries themselves. Enterprises can avoid this by advertising a job via their own channels and/or third parties, typically costing $225-$399 per role advertised2.
This is a low cost for a flood of applicants, but it’s only the start of the process. Finding the outstanding candidates means reviewing all the received applications - time-consuming for your staff to give careful consideration to each candidate - and even then, may miss points on CVs that show more or less suitability for the role. At this point, unintentional subjectivity creeps into the hiring process.
The time to interview shortlisted candidates has been estimated at 65 person-hours per role, representing $22,7503 - a bulky cost for bringing a single member of staff into your organisation. For software developers specifically, the cost has been estimated as $32k4.
The cost of onboarding a developer can be expressed in terms of productivity in relation to an existing employee. This has estimated as a $33k loss in productivity5, but can be observed accurately in terms of Actual Coding Effort within BlueOptima’s UI; one chart specifically compares new developers alongside long-term staff. We should consider that it takes and estimated 2 years for new recruits to become as familiar with the code base as an average developer working on it6 - and will take years of coding experience to become as performant as the best software developers - who we find to be 5.2 times as productive as the average developer - and whose time is most likely being used to train new developers. A study by Oxford Economics found factoring onboarding into the cost of recruiting a new IT employee totals £31,808.7
Having invested in bringing a new employee into the organisation, that person may not turn out to be right for job. Quantifying this costly mistake is complex, and in software development it could be argued that the technical debt an employee has produced should be factored in, which is itself difficult to cost, even with the most advanced approach to quantifying code quality. Cross-industry, mis-hiring has been costed as a range between 4x to 15x annual salary, increasing with seniority8.
Recruiting costs are set to increase because with demand for developers greater than supply, it's an employee's market, causing rising attrition rates, which currently range from 10-30%9. This means a need to recruit more developers for any given rate of company growth.
We offer an efficient, reliable methodology for shortlisting software developers to interview for a role, eliminating the costs and subjectivity in this stage of recruiting, as mentioned above. What’s more, basing hiring on objective metrics means your organization can demonstrate that prejudice-proof processes are in place.
The process involves asking applicants to solve a software problem in an online test. This is different to other Coding Challenge style platforms in that the metrics gathered calculate an estimation of software developer performance, leveraging BlueOptima’s productivity and quality metrics.
Efficient shortlisting affords a larger candidate pool, which supports finding the best developers available. Good developers are more worthwhile onboarding well, to encourage the developer to stay longer and deliver returns on the onboarding investment discussed above.
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1. "The Exact Agency Fee You’ll Pay for Engineering and IT Talent in 2016", ERE, March 2016. N.B. This relates to US recruitment agency rates. In the UK they can be ever higher, reported as 15- 30% in "The True Cost of Recruitment", Quarsh
2. "The Best Job Boards for Software Engineers...", Recruitee, August 2017.
3. "The hidden cost of hiring engineers — $22,750", Qualified, November 2016.
4. "True cost of recruiting a developer [infographic]", DevSkiller, December 2016.
6. "The High Cost of Losing a Developer", CodeBetter.com, November 2009.
7. The Cost of Brain Drain", Oxford Economics study commissioned by Unum, February 2014.
8. "The real cost of a bad hiring decision", HRZone, March 2015.
9. Attrition rates cited as approx. 10% in The Startling Cost of Losing a Developer, StackOverflow, June 2015, 20% within a year in "The True Cost of Recruitment", Quarsh and 30% in first 3 years in The State of Recruiting in 2015 (Infographic), SocialTalent, November 2015