The hidden cost of marketing recruitment (and how outsourcing helps you fight back)

Posted: September 23rd, 2016

Your Marketing director just quit; or a junior marketing exec announced a career break. Either way, though notice periods vary and strategic impacts differ, you face costs, uncertainty and the challenge of recruiting a replacement – or another way to do what they did for you. But what is the true cost of marketing recruitment? Is it really just the cost of hiring someone, the staff time involved and the recruitment agency’s commission? And is outsourced marketing really a viable alternative?

If you’ve ever found yourself amidst recruiting for an SME, or even a corporate, you’ll understand the related costs and feelings of wasted time and money. Even if you aren’t directly involved, they’re hard to miss.

When CJ walks, the cost typically combines lost output during ensuing recruitment, and the logistical costs of recruiting and assimilating a successor. Even then, total cost may rise. Why? Because evidence strongly suggests the likelihood that your new marketer won’t stay beyond a year. What’s more, their recruitment cost rises when you add the re-recruiting costs when they leave.

OUTSOURCING – An exciting alternative to marketing recruitment

What we’ll share in this article is that the true cost of replacing a newly departed director or manager includes not only obvious headline costs but also less-obvious hidden costs.  Fortunately, there’s an exciting alternative.

Read on and we’ll help you make the enlightened conceptual leap to the benefits of temporarily (or permanently) buying a ‘marketing department in a box’ for your marketing. Are you sufficiently forward thinking to consider this alternative to traditional marketing?

We believe you are…

Minimum cost; maximum marketing benefit

Short- or long-term, we’ll show how a carefully chosen outsourced marketing provider could solve your immediate problem – or transform your marketing. Best of all, it needn’t cost more than hiring a junior marketer to reap benefits including these:

  • Rapid deployment.
  • Consistency, continuity, controllability and scalability of strategic and tactical marketing.
  • Formation and ‘fine tuning’ of bespoke teams.
  • Access to best-of-breed marketing.

Rather than fall foul of traditional headline and hidden recruitment costs, how about minimising these and maintaining marketing momentum? Best of all, because you aren’t rushing to hire, you’ve time to rethink your marketing – while today’s activity continues in safe, cost-effective, hands. Read on to discover enlightenment, maybe even marketing nirvana…

Have you really got recruitment right?

This all begs the question: ‘How do you know you’ve got your marketing recruitment right?’ Similarly, for each new hire, no matter how good they seem, you’ll likely always wonder what skills and experience you missed out on. And you’ll never know the true answer.

Usually, sales promotions, exhibition presence or a product launch will quickly reveal ROI (or not). Compare this with new employees who need time to get into your culture and demonstrate their value. If they don’t, the cost is invariably much more than the obvious (headline) recruitment costs, a few months’ salary and benefits. Expect the wrong choice for to cost dearly, set your marketing back and probably do the same for your whole business…

Consider the benefits of outsourced marketing

As we’ll see below, outsourcing marketing management avoids the headline and hidden costs (including opportunity cost) of a bad hire. It also helps you achieve the following:

  • Improve strategic and tactical marketing effectiveness.
  • Support business continuity.
  • Make measuring marketing performance easier.
  • Have time to make a rational, informed decision about your future marketing approach.
  • Ensure availability of ‘best of breed’ marketing resources.
  • Enhance overall business processes.

But for now, back to traditional recruitment costs…

Headline costs

So what are the costs typically associated with hiring your new marketing director or online marketer?

For a start (once you’ve incurred the costs, in management time and resources. of selecting a recruitment agency), there’s what recruiters call headline costs. They’re the costs we often think of first when it’s recruitment time.

A smaller part of recruitment costs than you’d think

As we’ll see later, these are only part of the story (and the cost). Actually, they’re probably a smaller part than you’d imagine. That’s because of hidden recruitment costs. More about them later. Now, here are the headlines.

Even if we don’t call them such, everyone understands recruitment’s ‘headline costs’. They’re the obvious costs that we think of first. They include these:

  • Recruitment agency costs.
  • Recruitment advertising.
  • Attendance at recruitment shows and fairs.
  • The cost of specialist in-house recruiters.
  • Management time and expenses directly related to recruitment (e.g. reading CVs and interviewing).

Hidden costs

That’s all good and well, and headline costs are painfully real. However, they’re exactly what they’re described as: headline costs. Behind them is a small fortune in hard-to-see (and harder-to-measure costs). These hidden costs are one of recruitment’s nasty little secrets:

  • Cost of selecting and appointing a recruitment agency.
  • Cost of the time it takes to hire someone.
  • Human costs on employee health and morale.
  • Costs of getting the new hire fully contributing value.
  • Diversion of other company resources.
  • Re-recruitment costs if (when) a new hire leaves quickly.
  • Opportunity costs of recruitment (or a bad hire).

Let’s be clear. Considering headline costs alone is misleading. You shouldn’t need the incisiveness of the late Steve jobs or Alan Sugar, to realise this. Yet, according to a readily accessible article by UK recruitment process outsourcing provider Quarsh, most companies underestimate true recruitment costs by up to 95%. Ouch!

Let’s consider hidden costs further.

The cost of selecting a recruitment consultancy

It’s true! Unless you have a trusted external recruitment partner or in-house support, the hidden costs of recruitment start clocking up even as management selects and appoints a recruitment consultancy. Depending on the level of the vacancy, this could require considerable input to make sure the agency is suitable.

Time to hire

Imagine a scenario that you could face after a marketing manager announces their departure.

For a start, the annual marketing programme is due to be prepared and launched at your fast-approaching sales conference. There’s still lots to do, and in the meantime you must still deliver the current marketing programme. People rarely choose convenient times (for you) to leave; that’s the nature of job moves. Meanwhile your collateral production, social media, PR and online marketing ‘plates’ must be kept spinning. And if they’re not? That’s a further hidden cost to think about.

Meanwhile, the cost of passing time since the employee left is often overlooked. Even though everyone’s grumbling about the effect on the department and how long it’s taking to find their replacement.

Time to fill a position is a huge overhead

The truth is, the time it takes to fill vacancies represents a huge overhead. Recruiting directors or senior managers can easily take months. Meanwhile, the position remains unfilled and the unstoppable meter of hidden costs ticks towards final reckoning sometime in future. Or not, because experience shows businesses to be poor at recognizing or accounting for such costs.

What about the human costs

While positions remain unfilled, there’s a human cost to the business. It could be the effect of low morale or the gnawing effects of annoyance at the absence of a post-holder – especially if others must temporarily cover.

In extremis, expect higher incidences of sickness and absenteeism, ranging from a few employee-days here and there to long-term absence due to stress. It happens and it costs. Left unaddressed it can lead to graveyard spirals within departments as another absence ratchets-up pressure on those remaining.

You’re still clocking up hidden costs

Hopefully, of course, you’ll soon appoint someone. Then you’ll heave a sigh of relief at drawing a line under the recruitment costs (albeit impossible to measure exactly) incurred until then. Unfortunately, until your new marketing director or brand manager is up to speed you’ll still clock up hidden costs.

The cost of getting new hires up to speed

A 2014 article (HR Review) quoted Oxford Economics, a world leader in forecasting and quantitative analysis for business and government. Interpreting the report, HR Review said it revealed ‘…a major cost implication for firms replacing staff is the lost output … during the period of time the new worker is getting up to speed i.e. the cost of them being less effective until they reach… “Optimum Productivity Level” ‘

The article also reported that the cost of the period (typically 28 weeks) until new employees reach optimum productivity is the biggest cost component  when replacing employees.

So how does this cost manifest itself while departments are ‘in Limbo’ between an employee’s departure and the point when their successor contributes fully to the organisation? The truth is that, even if we can’t accurately quantify them, they appear blindingly obvious when we consider cost sources.

Diversion of resources

Other employees’ productivity will invariably be diverted into providing cover for the vacant position. It’s a two-pronged problem as colleagues higher and lower in the organisation are drawn into providing cover.

In military parlance, employees higher up, such as the marketing director or business owner, find themselves providing ‘top cover’. Meanwhile, lower in the hierarchy, people who reported to the departed employee are also stretched.

Challenging enough in large corporations, this is particularly painful for SMEs where marketing is unlikely to have been overstaffed. Moreover, if an owner-manager runs the business (as with many SMEs), problems will be exacerbated.

What if a new recruit leaves quickly?

Costs don’t necessarily end when your new marketing director is in-post and contributing. That’s because a high proportion of new employees move within 12 months of starting (estimated at around 50% too). When this happens, not only must you account for recruitment costs until that point, but also the additional costs of restarting the process. One theory for this is that short recruitment periods only give limited contact between candidates and companies. This isn’t usually enough to develop strong cultural rapport and really get to know each other. Organisational ‘fit’ only becomes apparent (or not) after the new hire starts.

Don’t forget opportunity costs

Another virtually impossible-to-measure cost is the opportunity cost while your position remains unfilled. And while other employees cover the role.

This is a logical step beyond costs associated with the period while recruitment takes place (or doesn’t), and while the new recruit finds their feet. Some missed opportunities may be identifiable, like the trade show you couldn’t attend because you didn’t have an exhibition manager. Or an acquisition that was called off before completion. Unfortunately, other opportunities won’t be identified…

A few examples

Here are just a few examples of opportunity costs associated with marketing recruitment:

  • Senior management delays work on top-level projects.
  • Promotional activities are postponed or cancelled.
  • New marketing opportunities are missed.
  • In extreme cases, with high-level individuals, there could even be stock-market implications.

Opportunity cost can be defined as ‘loss of other alternatives when one alternative is chosen’. Theoretically, you could choose not to replace a colleague (it happens). However, if you do, remember that there will be a more-or-less easily measured cost because certain things won’t be done if it happens.

Swap costs for opportunities

Interestingly, with an enlightened approach to your marketing, and an open mind, you can swap recruitment costs for a positive opportunity with outsourcing. We’ll call that opportunity-profit and return to it later… meanwhile, back to other opportunity costs associated with recruitment and the post-hire period.

As you divert resources to cover the unfilled position, manage and execute recruitment of a replacement, you’ll incur other opportunity costs. For instance, senior management may have to delay strategic projects and promotional activities may need to be postponed.

A special problem for SMEs

Again, new opportunities, which your new hire would have pursued, may have to be missed – again, temporarily or permanently. Again, this is more likely in SMEs with small marketing departments.

Remember too, the near 50:50 possibility that, despite your best (costly) recruitment and induction process, the new employee doesn’t work out and leaves within months. If the hire doesn’t work out, this will usually mean more missed opportunities. Imagine trying to quantify them…

Now’s a good point to revisit your doubts about how much better even a ‘successful’ hire could have been. Try contemplating this at 3 am: what if you’d recruited someone better, with stronger skills, more experience and greater potential? As an owner-director or marketing director, it’s not good for your sleep…

Internal vs external costs

So far, we’ve considered recruitment cost in terms of headline and hidden costs. It’s also worth looking at these from the internal and external recruiting cost angle.

Whether you do recruitment internally or externally, many of the headline (‘logistical’) and hidden costs are broadly similar: advertising, agency fees or internal HR costs, on- and offsite management time; and travel and subsistence costs associated with recruitment meetings, preparation and interviewing.

Your management team isn’t working on other tasks

What’s more, for every hour you or your well-paid senior managers are recruiting, you’re not addressing other responsibilities. Furthermore, the higher up the management hierarchy, the less the likelihood of anyone else being able to cover their roles.

So what are the logistical costs for a typical hire? Let’s take a top-level look at the internal and external recruitment costs of getting a new recruit on board. For a full exposition of costs, we recommend the article referenced earlier, but here’s a summary.

Recruitment cost (external)

For the type of marketing roles we’re considering, recruitment agency fees can easily be 15–30% of starting salary (more if a specialist executive search consultancy is used).

Now add advertising costs, database tools, social media and management time while working with the agency/consultancy and during later onboarding. Remember to budget time for specifying roles, reviewing CVs and interviewing. And re-interviewing because candidates reject many offers (some sources say 50%).

Typical internal costs

The Oxford Economics report reveals that replacing someone incurs significant employers’ costs – in 2014, £30,614 per employee was realistic, with typical costs made up as follows:

  • Hiring cost
  • Total compensation
  • Eventual severance pay
  • Disruption costs while in position

As we keep emphasising, the true total cost of recruitment isn’t just recruiters, ads and agency fees. Actual cost can easily be twice headline cost and approximately twice the new employee’s starting salary.

Recruitment cost (internal)

Using internal resources to fill vacancies typically costs as much as using external consultancies. Not least because of similar demand on management time.

Although estimates suggest that internal recruitment can halve recruitment costs there’s a caveat. Apparently, over 70% of in-house recruiters fail to fill even 90% of vacancies themselves. As a result, they still need external help, a hybrid solution, which negates other savings

Internal recruiters can actually add cost

As well as taking longer and being costlier than external recruitment, internal recruiters add cost because they rarely (if ever) have as many up-to-date industry contacts or external consultancies’ extensive databases.

There’s general agreement that hidden costs of post-departure dislocation dwarf headline recruitment costs. It’s easy to find expert estimates that dislocation costs recruiters up to five times the actual recruitment cost. As a result, any headline savings, from using in-house rather than external agencies, are easily wiped out.

Most recruitment is reactive

Most recruitment is reactive, with recruiting organisations seeking out candidates when need arises rather than nurturing prospective candidates.

Additionally, when vacancies arise, recruiters rely heavily on candidates who are already in the market, registered with agencies, viewing job ads or active on job sites. In total, this is estimated at about 20% of qualified candidates. In reality, companies can only access a tiny percentage of suitable candidates.

What skills have you missed with a great hire?

For each new hire, no matter how good they seem, there’s the nagging question of what skills you’ve missed. Worst of all, you’ll probably never know; that’s just part of the uncomfortable uncertainty surrounding reactive hiring. Being out of control creates a perfect environment for panic decisions and recruiting someone for the wrong reason.

Contrast this with feelings of control that outsourcing gives. Not only is your ongoing marketing programme delivered, but strategic planning too. And significantly, you buy yourself precious time to make the correct recruitment decision for your current and future marketing needs.

It doesn’t take much research or reflection on experience to see how true costs of replacing newly departed marketers involve much more than just obvious headline costs. Always remember the hidden costs!

A ‘marketing department in a box’

So, have you taken the conceptual leap to the benefits of a ‘marketing department in a box’? Good! We knew you’d get it, whether for all or part of your marketing, as an interim measure or in perpetua as an enlightened alternative to traditional paradigms.

Either way, we hope you’re thinking about the possibilities of outsourcing with an experienced provider. As other enlightened organisations know, it really can solve your immediate problem or completely transform your marketing – for the annual cost of a marketing junior!

Rethink your whole marketing approach

As we’ve explained, outsourcing is increasingly popular in many fields and marketing is no different. The benefits include these:

  • Rapid deployment.
  • Consistency
  • Time to choose between traditional recruitment and more-enlightened approaches.
  • Controllability
  • Scalability
  • It allows formation, deployment and easy ‘fine tuning’ of a bespoke team.
  • Continuity
  • Access to best-of-breed marketing.

And here’s an added bonus, not mentioned earlier:  if your outsourcing provider also offers integrated HR and sales development you could avoid the corrosive politics and internecine struggles that too often negatively affect internal departments.

Don’t fall foul of recruitment’s headline, hidden and opportunity costs. Instead, how about minimising these and maintaining marketing momentum?

Because you don’t have to rush into a new permanent hire, with its associated costs and risks, how about using the time to rethink your future marketing. Meanwhile, today’s activity continues on a convenient ‘power-by-the-hour’ basis in the demonstrably safe, cost-effective, hands of your outsourced-marketing partner.

Now there’s a thought to take to the Board – and the market.