Bad Candidate Experience Is Expensive
By: Jan Tegze
Tags: Recruiting, Talent Acquisition, Hiring, Candidate Experience, Recruitment

How Expensive Is It Not to Follow Up

I couldn’t find any math equation that could help me to calculate how much not giving feedback and bad experience costs companies. That’s why I created one. (Of course, if you have better one, just share it in the comments of this article or contact me)

Math equation:

(NCWF * CPA) + (NCWF * TA * PP * ARPC) = Your Potential Loss per Year

All the costs and numbers are an example based on surveys and public data.

Case study: You have 10,000 candidates per year, reviewed 7,000, and hire 70 candidates. And you never checked or gave feedback to 3,000 candidates.

Legend:

NCWF = Number of Candidates Without Feedback (3,000 candidates)

CPA = Cost per Application (15 USD per application — avg. number from appcast)

TA = Target Audience — How many candidates that applied could also be your potential customers that could buy your product or service? If you are Coca-Cola, your TA will be almost 100% because most of your candidates are prospective customers of your soft drinks. But if you are selling “Industrial Machinery” your target audience of potential customers from all candidates that applied to your roles will lower. The number of people who are going to buy your product or service and are also your candidates will be 0,01% or lower.

PP = Purchasing power (Percentage of people that will choose your competitor instead of you)

(46 % said, “I will take my purchasing power somewhere else.” Data from North American CandE Awards research)

ARPC = Average Revenue per Customer

The average revenue per customer is information that you can find from your sales team. For this example, I am going to use: $ 2,000 USD per customer.

Example

(NCWF * CPA) — How much money you invest to get these 3000 candidates

(NCWF * TA * PP * ARPC) — Effect on your brand because of the bad experience

(NCWF * CPA) + (NCWF * TA * PP * ARPC) = Your potential loss per year

(3000 * 15) + (3000 * 0,10 * 0,46 * 2000) = $ 321,000 USD per year

The “0,10” is there only for an example of the number of candidates that are also potential customers (check the TA above).

As you can see from the math equation, not giving feedback and not informing candidates of the outcome of an interview could cost your company $ 321,000 USD per year.

If you have 10,000 candidates and you process 7,000 of them just to hire 70 people, in the 3,000 candidates that you didn’t contact you could have another 30 potential hires.

However, if you plan to hire these 30 new people, in many cases your recruiters will open new requisitions and wait for new candidates, and they will also approach new candidates on LinkedIn, etc., and not utilize the candidates from the previous roles.

Based on their experience, candidates from their ATS won’t be interested or available when they reach them. If you have a terrible experience with a company and, after three months, some recruiter from that company contacts you, how excited about the job opportunity with that company you will be?

And acquiring new 3,000 candidates will cost you (CPA * Number of candidates).

In this case $ 45,000 USD.

I am aware that this math equation has many variables, but, as I said before, I didn’t find any that I could use, so that is why I created one.