The ever-evolving nature of the modern workplace, driven by the rapid pace of technological change, poses a multitude of complex challenges for leaders and HR professionals to grapple with. In today’s fiercely competitive business world, the ability to attract, retain, and develop top talent has become the critical factor that sets out successful organizations from the rest. As a result, leaders have to prioritize talent management as a means of staying ahead of the competition and securing long-term success.

1. Talent Management: The Key Challenge for Today’s Leaders

According to PwC’s 2023 CEO Survey, talent is a key concern for CEOs, with 54% of respondents saying that the availability of key skills is a significant threat to their organization’s growth prospects. Attracting and retaining top talent is becoming increasingly difficult.

Korn Ferry‘s research shows that the global talent shortage is expected to reach 85 million people by 2030. This shortage is caused by several factors, including the aging workforce, demographic shifts, and changes in work.

Leaders are encouraged to focus on improving their effectiveness and efficiency in talent management to meet this challenge. To assist their employees in gaining the abilities and information necessary to thrive in today’s quickly evolving business world, they will need to invest in training and development programs. A culture that appreciates and encourages creativity, teamwork, and ongoing learning additionally needs to be established.

Additionally, leaders need to approach talent management with greater strategic thinking. They have to determine the skills and competencies that are most important for the success of their organization using data and analytics, and then establish focused plans for obtaining and growing those talents. Additionally, they should be open to trying out novel Talent Management strategies, such as flexible work schedules and alternative performance review methods.

For example, PepsiCo’s HR leaders struggled to access critical information due to the company’s decentralized structure and data silos. As a result, the teams were unable to leverage their knowledge to make informed decisions.

To overcome this challenge, PepsiCo used AI-powered Talent Analytics to identify high-potential employees and provide personalized development plans. The company’s AI-powered platform analyzes employee data, including performance reviews and training history, to identify employees with the most potential for leadership positions.

Ultimately, the success of any organization depends on the strength of its talent. By focusing on Talent Management, leaders can create a competitive advantage that will help their company thrive in the years to come.

2. Revolutionizing Talent Management: Exploring the Advantages of AI-Powered Talent Analytics for Leaders

According to Forbes, companies that adopt AI-powered Talent Analytics can improve their employee retention rates by up to 35% and reduce their recruitment costs by up to 30%.

According to PWC, 73% of executives believe that AI will be a significant driver of business success in the coming years.

AI-powered Talent Analytics can help leaders overcome the challenges they face in today’s business environment. Here are some of the benefits of AI-powered Talent Analytics:

• Decision Making: AI-powered Talent Analytics can provide leaders with valuable insights to make better decisions. By analyzing data on employees’ performance, engagement, and retention rates, leaders can identify areas that need improvement and make data-driven decisions to address those issues. For example, HAPPYCAR achieved reduced the time in the pre-selection process of candidates by 78%. Moreover, they were 40% more satisfied with the new candidates after employment.
• Automation: According to Harris Poll, HR managers who do not fully automate say they lose an average of 14 hours a week manually completing tasks that could be automated. AI-powered Talent Analytics can automate many tasks, increasing productivity and reducing the workload for leaders and HR professionals. For example, Walgreens established automation of leave claims where AI defines whether they are paid or unpaid, which helped to increase efficiency in the HR shared services group by 73%. AI-powered tools can provide learning recommendations for employees, recommendations on project staffing, and even automate the onboarding process for new hires.
• Early Alerts: Credit Suisse saves approximately $70,000,000 per year by predicting employees at risk and retaining high-performing employees. AI-powered Talent Analytics can provide early alerts on potential issues such as employee turnover, disengagement, and low productivity. By detecting these issues early, leaders can take proactive measures to address them before they become a more significant problem. As AI technology continues to evolve, it will become an increasingly valuable tool for leaders in managing their workforce.

3. Transforming Your Business Landscape: The Benefits of AI and Talent Analytics for Modern Organizations

Recently the German Association for Consumer Studies (DtGV) has recognized EDLIGO as one of Germany’s 3 most innovative medium-sized companies in Software and Hardware. The recognition results from a study conducted to identify the most innovative medium-sized companies in Germany across 30 industry sectors. The study evaluated the patent performance of German companies with revenues not exceeding one billion EURO between October 1, 2021, and September 30, 2022. The study identified EDLIGO as one of the top-performing ones and included it in the list of 500 most innovative companies published by the prestigious German magazine, Stern.

EDLIGO is a cutting-edge AI-powered Talent Analytics platform that offers a comprehensive solution for leaders and HR professionals to tackle the challenges posed by today’s business landscape. With its Talent Analytics feature, EDLIGO helps organizations establish a clear, objective, and data-driven baseline for their employees. This enables them to gain early insights into potential issues such as employee turnover and disengagement, allowing them to take proactive measures to address them before they escalate.

The platform also assists organizations in identifying top performers and future leaders, discovering hidden talents within their workforce, and developing their employees’ potential for future growth. By increasing retention rates and maximizing employee engagement, EDLIGO helps organizations to establish a strong foundation for their growth.

EDLIGO‘s competency mapping functionality enables managers to evaluate the skills and competencies of their employees. The platform generates a skill gap map, providing managers with the necessary insights to identify areas where employees may need further development. This helps managers to create a structured and targeted talent mobility program, promoting internal talent search and personalized development plans for employees seeking to advance within the organization.

In addition, EDLIGO automates several tasks such as learning recommendations, project staffing, and onboarding processes, resulting in increased productivity and reduced workload for leaders and HR professionals. Overall, EDLIGO is an indispensable tool for leaders and HR professionals who seek to optimize their organizational processes and enhance their employees’ development, engagement, and retention

The future of leadership and HR in the age of AI is exciting. By leveraging AI-powered Talent Analytics, leaders can overcome the challenges they face and build a more productive and engaged workforce. With platforms like EDLIGO, leaders can stay ahead of the competition and succeed in today’s fast-paced business environment. If you would like to know more about how AI and Talent Analytics can help your organization succeed, visit our website at https://www.edligo.com. 

Artificial intelligence is an emerging technology transforming the way we live and work. With AI going mainstream, the world economy is expected to be impacted in multiple ways. While PwC’s Global Artificial Intelligence Study estimated that AI will lead to a 26% increase in global GDP, McKinsey Global Institute is foreseeing that 45 million Americans, which is about one-quarter of the working class, would lose their work to automation by 2030. AI guru Kai-Fu Lee, the author of AI Superpowers: China, Silicon Valley, and the New World Order and CEO of Sinovation Ventures, predicts that 50% of all jobs will be automated by AI within the next 15 years.

So how will AI impact the workforce, and how what role will it play in HR?

AI Will Create More Jobs Than It Eliminates

According to the World Economic Forum, 97 million new jobs will be created by 2025 thanks to AI. So, AI will replace some jobs, but new jobs will be introduced to support the maintenance and use of artificial intelligence. And already in 2019, creating new jobs as artificial intelligence became more widespread inside companies has become a huge priority for C-suite leaders.

Based on PwC report, around 20% of executives in the USA companies have AI initiatives that will roll out across their businesses, and they expect to invest more in both automatizations of the current tasks with a help of AI and creating and filling the new roles which are associated with AI operations.

Many of the anticipated new jobs have already come to life, such as for example Financial Wellness Managers, or Memory Curator and Augmented Reality Journey Builder, Chief Ethical and Humane Use Officer among all.

However, while opportunities are created, some challenges will arise. Most of the automation will be concentrated in the starter positions, making it increasingly hard for fresh graduates to find a job. Organizations will mostly rely on freelancers and contractors to get the rest of the tasks done. Full-time employment might be reduced drastically, and governments will struggle to guarantee a basic income for everyone.

Human Skills Will Grow in Importance

The question of whether AI will replace humans arises from the assumption that AI and people have the same abilities and qualities, but actually, they don’t. AI-powered machines are more accurate, faster, and very rational, but they are definitely not emotional, or culturally sensitive. AI is extremely useful in improving the speed of data analyzing and decreasing the reporting time. Moreover, AI is able to analyze huge volumes of data and draw comprehensive reports.

Human abilities are more expansive than machines’ abilities, which are only responsive to the data available. People are able to use imagination, they can feel and evaluate changing situations, which help them to move from short-term to long-term issues. These people’s abilities are and do not require a constant supply of data.

The demand for human skills will only grow. Human skills (also known as “soft skills”) show our ability to relate to one another and refer to aspects such as empathy, compassion, and authenticity. People with well-developed human skills can create deeper connections with other employees and customers.

AI in HR

For many industries, the focus for the next year is on deciding how to use AI to help employees do their jobs faster and better. For HR leaders this is already happening. Oracle conducted research with 600 HR leaders who are using AI at work, to learn where AI was being used in the workplace to re-evaluate and transform the employee experience. Most HR professionals welcome the integration of AI into their HR operations. In fact, 64% of them reported that they would trust a robot over their manager for advice.

Moreover, about 50% of HR department employees are already using some form of AI at work (compared to 32% in 2018). The report also says that 65% of workers are optimistic, excited, and grateful about having AI as a helping hand.

AI is increasingly being used to automate many HR processes, and it appears that automation is going to pay off big time. Take Hilton as an example, with AI-based screens and interviewing candidates, the organization managed to increase the speed to hire by 85%. Moreover, AI also helped increase the diversity of their talent pool and enable our recruiters to identify a high-performing candidate faster. Here it is important to mention that artificial intelligence can be used only as a recruiter’s tool to assist them in the hiring process, but not in making the final decision to hire.

Since running an HR department requires a very personalized and empathetic approach to each of the employees, AI is unlikely to replace HR managers in the future, and a successful HR ecosystem will comprise the right mix of People Analytics, AI, and human intervention. Data-driven insights will help make multidimensional decisions but will not make these decisions by themselves alone.

Where is AI Being Used in HR?

1)    Learning and Development

Continuous learning is important for both employees and their organizations. However, the challenge that we face today in a rapidly moving business and technological environment is that skills have a shorter lifecycle than they were 10 and more years ago.

And it is where AI in upskilling and reskilling can truly add value. Some of the key L&D-related areas include personalized learning pathways, adjusted to the needs of each person, learning analytics, evaluation of corporates’ skills needs, and development of cost-effective training strategy.

If you would like to know more about how AI and Analytics can help to create a cost-effective L&D strategy, schedule a call with EDLIGO experts.

2)    Map of people and their skills

Knowing your people and their competencies is important for any organization to align their goals with the current human resources they have and think of upskilling strategies. Companies and their employees must adapt to the changing environment fast, and to make the change smooth, HR leaders should know what skills and competencies gaps the company’s staff possess. Based on this information, they can organize training, courses and acquire new people for the company.

AI can help assess the employees fast and precisely, as well as align it to corporate goals and evaluate what skills are missing. Check here for more information about creating a map of people and their skills.

3)    Talent Mobility

It is not easy to just move good employees to other departments. Through structured and data-driven talent mobility, HR leaders can fill open positions in a cost-effective way. Moreover, this way they can satisfy the career progression aspiration of their employees, and AI can help optimize this process.

AI-based Analytics help to solve the mobility challenges such as finding better skill matches, improving employee visibility to career opportunities, enhancing the employee experience, and creating pools of internal talent. It can release the power of the people an organization already has.

4)    Identifying future leaders and top talent

Identifying top employees requires measuring their abilities and skills across different metrics. A person can have extraordinary abilities in one field but fail to adapt to changing circumstances. The more complex the combination of variables gets, the more difficult the search becomes. AI and Analytics tools can perform data analysis to help managers understand the performance of their workforce over multiple metrics, building a more comprehensive picture of the talent’s potential.

5)    Data-based talent management

Talent management involves the processes of retaining high-quality employees, developing their skills, and continuously motivating those employees to stay in the organization.

AI can predict the likelihood of an employee leaving, by evaluating employee data that includes rewards, time in role, performance, and measuring these metrics against attrition levels. Thus, Talent Analytics and AI support HR in people management to have an awareness of any potential problems before they arise and allow for interventions to occur before matters become more serious.

To learn more about AI use in the Human Resources field EDLIGO team has interviewed HR Leaders about their experiences and opinions about the role of AI in Talent management.

Here are some great insights:

David Swanagon

Head Of People Analytics North America, Ericsson, The USA

Official Member, Forbes Human Resources Council

1. What is the current role of AI in HR?

The Future of Work = People + Machines. Currently, AI plays a large role in candidate sourcing and critical skills identification. This includes driving D&I objectives by ensuring that offer packages are equitable across race and gender. For the most part, large companies have used AI to help facilitate HR Service Centers. Front-line tasks such as compensation and total rewards are better handled using Bots and automation tools. As part of this, training departments have adopted AI to help manage learning pathways. These recommender programs assist employees in identifying career paths and growing skills in their chosen domain.

2. How can AI transform HR in the future?

In the coming decade, it’s possible that machines will outnumber people in terms of workforce. This means that a new leadership model will have to be created to handle Ethical AI and automation. The concept of “Leading Machines” will become increasingly important as C-level executives grapple with the integration between AI and people operations. This includes how human skills are deployed, alongside the mix between build, buy, and borrow staffing levels. At a transactional level, AI will help automate most HR shared services. However, it will also help with strategy formulation by identifying opportunities for employees to partner on projects and leverage shared expertise.

3. How can AI improve decision-making for better business outcomes?

It’s important for CHROs to understand that data privacy is part of the employee experience. A key aspect of Ethical AI is ensuring that data is effectively managed across organizations. This includes establishing a chain of custody for sensitive information, alongside a policy framework for how data will be used to make talent decisions. Companies that excel at this process will enjoy stronger engagement. Separately, AI helps provide an objective opinion to executives before they make a decision. Whether it’s a capital investment or talent decision, many leaders are challenged by competing viewpoints. The objectivity that AI provides allows executives to filter both positive and negative elements. This helps minimize downside risk, while identifying new opportunities for reinvestment. If implemented correctly, AI can help reduce organizational bias. However, the same tools can do the opposite if utilized poorly.

Prianty Rojo

Talent Acquisition US Manager – PepsiCo, Latin America

1.     What is the current role of AI in HR?

HR roles are more and more connected to business strategy. AI helps to be more efficient and measure our processes so we can play an active role with the organization and be more focused on our pilar: People.

2.     How can AI transform HR in the future?

AI it’s an enabler to create business acumen cross-function. In the future will help to talk “the same language” with the rest of the organization and create more accurate strategies from a holistic perspective.

3.     How can AI improve decision-making for better business outcomes?

For HR has been challenging to set down conversations, strategies, and results into KPI’s, SLA’S, etc. Transform qualitative into quantitative, is a big advantage so we can talk, think, and plan with clear data. Be people and results-driven.

Lucas Velmer

Human Resources Business Analyst, United States Department of the Army, The USA

1)    What is the current role of AI in HR?

The current role of AI in HR is largely dependent on the organization. An organization dictates priorities and both AI progression and HR progression need to be priorities for there to be a role in HR. Otherwise, HR will continue to progress as societal norms continue to evolve, but still, be largely dependent on human-to-human interaction with some degree of automation in support. That said, AI helps HR professionals save time while providing quantifiable metrics for both people management and strategic business decisions.

2)    How can AI transform HR in the future?

AI can assist HR professionals through automation of mathematics, statistics, and information management, saving countless people-hours. A computer can calculate advanced formulas and parse statistical data in a fraction of a second whereas it can take human several hours to draw the same calculated conclusion. This allows the analyst more time to understand the metrics and their impacts, identify potential bias, and solidify information for knowledge sharing.

3)    How can AI improve decision-making for better business outcomes?

Bottom line: humans are more important than hardware. AI can and should always play a role in decision-making, provided the inputs are correct, inclusive, and bias-free. AI can run calculations, algorithms, and provide statistical information in an instant which then allows someone to analyze the information and potentially use AI to run predictive algorithms to analyze potential outcomes. This, coupled with experienced HR professional analysis, helps executives understand the impacts of their decisions on their current and future employees. On a final note, AI should never be the priority over humans. AI cannot and should not quantify human sentiment, feelings, or anything else that is subjective and truly unquantifiable. These things should always be left to humans.

Alfredo López Luján

 People Analytics Manager in Middle Americas AB-InBev, Latin America

1.     What is the current role of AI in HR?

Artificial intelligence has become a hot topic as it has transformed many businesses. The current role of Human Resources and becoming another user of this methodology is to focus people to interact with technology. Many people are afraid of this transformation. Every day we read that a robot is going to replace us. What is necessary is to show people how to interact with the new tools. We have to help people grow and evolve. As humans, we can transform our behaviors and our habits. The important thing is to show how to learn to “get along” with technology.

2.     How can AI transform HR in the future?

Basically, it will be in charge of providing a lot of information for decision-making. Processes such as Recruitment and Selection, commitment to the company, staff retention, and performance measurement have changed today thanks to more data and deeper analysis. Not only will it speed up and facilitate your work, but it will also allow you to see “details” or “situations” that would never have been detected. With this, you will be able to observe and understand interactions. We are currently looking at issues of leadership, team building, and communication between staff. Behavioral analysis shows you that we have a large number of personalities, which also change with situations. But analyzing this, each time will bring us closer to the study and understanding of humans.

3.     How can AI improve decision-making for better business outcomes?

In the case of Human Resources, it will allow us to know the employees with the highest performance, to recruit and retain more effectively, to make financial decisions about the construction of projects where people are involved. How could you select the right employee for a position from the hundreds of applications that come to us? How to know if induction is adequate for the requirements of the personnel, not only at present but in the future when they are required? How will you communicate and how will you be prepared for the next crisis or disruptive event? How are your employees going to interact with customers by knowing their preferences? We will solve all this with AI.

 Kirsi Elina Kallio

Learning and Development Specialist, CEO and Founder of Kasvun Katalyytti Oy, Finland

1)    What is the current role of AI in HR?

One of the most unutilized resources in modern organizations is AI. Already, organizations collect a lot of data related to their personnel, stakeholders, and customers. Data as such, however, does not yet provide support to evidence-based decision-making. AI-based solutions are needed to refine big data masses to relevant knowledge.

2)    How can AI transform HR in the future?

HR is still under presented in the management teams of large corporates, although a human resource is the most valuable resource of the companies.

Today, data is power. By offering relevant data-based knowledge to support business decisions, it is possible to raise HR’s profile.

Traditional operational HR processes are easy to automate This releases more time to HR professionals to do more strategic planning and developments based on data.

3)    How can AI improve decision-making for better business outcomes?

The problem in big organizations is, that the higher-level managers are not able to see what is happening on the front line. With more efficient AI solutions, HR is able to generate vital data about performance and learning at the customer interface. This helps to better predict e.g. future competence needs.

At the moment, the decision-making process is largely based only on feeling. AI-based analytics has been criticized for producing distorting data to support decision-making. However, it must be remembered that it is always a human being who decides where and how data is collected and for what information obtained is used.

Marcin Gabryel

Recruiter / Senior HR Specialist, Arla Foods, Poland

1)    What is the current role of AI in HR?

Artificial Intelligence has more influence to HR then ever before. The number of processes that can be taken care of by AI is still increasing. These are low-value and low-risk tasks like tracking systems, document verifications. In my role, more focused in recruitment area AI is also more involved in pre-selection processes, but also helps with repetitive tasks, like scheduling of meetings.

2)    How can AI transform HR in the future?

I believe that automation processes that are ongoing in many different fields will be slowly taking over more and more tasks. In my area for example – the initial stages of recruitment processes like phone screens (1st interview) are already handled using AI in some companies. Even selection (or pre-selection) processes can be assisted by AI (algorithms). This allows us to focus more on different tasks and saves time.

3)    How can AI improve decision-making for better business outcomes?

AI has the ability to analyze huge amounts of data in a very short time and this is definitely crucial. Providing valuable insight (or even predictions) based on analyzed data can be helpful in many areas such as finance, marketing, HR.

 Ella Kiselyuk

Executive Director of Human Resources, City University of New York-Baruch College, The USA

1)    What is the current role of AI in HR?

During these unprecedented times and impact of COVI19 on HR overall operations, an immediate need to shift to AI is inevitable. The current role of AI in HR is relatively new as many organizations are still the midst of modifying their policies and procedures to incorporate hybrid and/or fully functioning business operations. For example. a response time to employees’ daily inquiries regarding their benefits, time and leave, retirement, etc. has tremendously changed. HR professionals spent more time on checking multiple databases/software before a complete and accurate data is released to the employee. There is an increased demand to automate some of the transactions in order to improve HR operations.

2)    How can AI transform HR in the future?

AI will transform HR operations by allowing HR professionals to become more strategic and engaged. A lot of transactional operations that are currently performed by HR personnel, will shift to AI. This will resulted in streamlining some of the transactional processes as well as it will reduce a “human” error factor, especially when it comes to data entries. Moreover, a presence of both, human and technology in HR daily operations will create an inclusive and non-biased environment during recruitment and on-boarding activities. A pre-selection process will be significantly reduced and the most accurate, valid and comprehensive data will be shared with senior leadership and stakeholders. HR will be able to define and produce various metrics on a regular basis relying solely on AI findings.

3)    How can AI improve decision-making for better business outcomes?

The leadership has to take into account how employees will embrace and respond to AI. While some may think AI will replace a human factor during HR interactions, the current business environment and its innovative trends demonstrate the need to automate more HR transactions. Once an accurate, data-driven information is shared with the leadership, it will help to focus on many factors including cost, retention, savings,etc. AI will assist in determining whether the company’s resources are properly allocated and positioned in a competitive environment. It will also help improving business operations by branding the company’s innovative and diverse approach and its impact on well-being of the employees. A reduction in hours spent on compiling data will also have a significant impact on employees’ morale and performance.

In summary, AI is already utilized by HR Leaders in different countries and across different industries, and it has more potential to develop even more use cases to make the working process even easier and more efficient.

If you would like to know more about how AI and Talent Analytics can help your organization to succeed, please contact EDLIGO team or schedule the demo.

How much does it cost to hire an employee?

The National Association of Colleges in America found out that the cost of hiring an employee in a company with 0-500 people averages $7,645. Other studies such as the one published by the Society for Human Resource Management in the USA, estimated that the average cost of hiring an employee is $4,129, and $14,936 for hiring an executive.

Bringing new employees into your organization requires costs that include both direct costs and costs associated with the time and effort spent during the process. It is important that organizations get a clear picture of the expenses associated with hiring a new employee for better financial planning. But how to determine these costs in the most accurate way?

Recruitment costs include direct costs (the recruitment process itself) and indirect costs (the rest, related to the process). The cost of a company’s employee includes not only the total salary of the employment contract and the related employer’s social charges but also the costs related to the recruitment and integration process. Hiring someone who isn’t a good fit for the job must also be included in the calculation.

Calculation of the direct cost of a new hire

To define the direct cost of an employee for the company, you should consider the following elements:

Gross salary: Salary stated in the employment contract. Understanding your employee’s gross pay is critical since gross wages are required to calculate the amount of taxes and deductions that must be made, particularly if deductions are based on a percentage of the employee’s gross salary.

Benefit costs: The 2019 Benefits Benchmarking Report, prepared by The Conference Board of Canada, indicates that benefits represent an average of 10% or about $9,000 of an employer’s total costs in compensating an employee. These benefits include paid time off, supplemental pay, insurance, retirement plans, mental health coverage and savings plans.

Employer charges: These include health insurance, unemployment contributions, supplementary pensions, and professional training. Depending on the country of the incorporation of the company, these charges can range from approximately 18% to 26% of a worker’s base salary (CNN Business).

Calculation of the indirect cost of a new hire

When evaluating the overall cost of hiring employees, you should consider indirect costs such as:

Costs related to the recruitment process: It is necessary to consider the hourly cost of the different recruitment actors multiplied by the time spent for each phase of the recruitment (writing the job offer, choice of the means of diffusion of the job offer and diffusion, analysis and sorting of the received applications, interviews, choice of the selected candidate according to different criteria, etc.).

Costs related to the integration process: Once the candidate has been chosen, other costs related to the integration (or onboarding) will necessarily be incurred, such as the preparation of the employment contract, medical examination, and preparation of the work equipment. The integration process also entails other costs:

• Training costs: training and preparation of a new hire begins when a new employee enters your company and ends once she or he is fully capable of doing work on their own. According to Training Magazine report, large companies increased overall training expenditures to $22 million in 2020 from $17.7 million in 2019, while small companies increased from $367,490 to $506,819. Although training and development of an employee is an ongoing process and should never be stopped to guarantee personal and skills development of each employee and his or her capability to perform new tasks.
• Unproductivity costs: new hires don’t always provide their maximum effort straight away. This means that an employee’s productivity may be lower for the first two years after they start working. Companies will be missing out on potential value for months or years after their former employees have left.

Costs related to wrong recruitment: The ” wrong recruitments ” will cause additional costs such as the implementation of the termination of the contractual relationship and other administrative documents related to the termination, the operation of loss related to the added value not received by the company during the entire period of unproductivity of the employee as well as the additional costs related to the launch of a new recruitment and integration process to replace the wrong recruitment.

The Society of Human Resource Management (SHRM) in collaboration with the American National Standards Institute (ANSI) created a generalized cost-per-hire (CPH) formula:

To discover more about the cost of hiring and employee retention in the Human Resources field, EDLIGO team has interviewed HR Leaders about their experiences and opinions.

Here are some great insights:

Michael Thompson

Head of HR Data & Analytics at CrowdStrike

Why is it more beneficial for the company to retain employees than to hire new ones?

The question has a lot to it, but I’d say it’s beneficial to retain because of all the downstream impacts that aren’t immediately obvious when an employee is at risk of leaving. I’d first start and say, normalize stay conversations to understand and gauge when an employee may be susceptible to external offers. And then work with them to understand if what they are seeking is something feasible. Retaining is often cheaper in the long run. The number 1 reason employees leave is compensation or career development based. If that’s what the employee is looking for and they are top talent. Retain them. Otherwise, you will lose productivity when they leave. This is a cost. You will burn out those who need to cover for the loss, which may lead to more turnover, more cost. Recruiting is not cheap for a company. It involves marketing, paying the recruiter for their time, interviews which cost productivity. And then ultimately when a replacement is identified companies are having to pay a higher salary than the prior incumbent. And then there’s ramp-up time and onboarding costs. So, in the end, giving the prior incumbent a 10-15% raise and new title would have been cheaper than the recruitment cycle.

Marcus Baker

Head of People Analytics at PerkinElmer, Inc.

Why is it more beneficial for the company to retain employees than to hire new ones?

Many leaders receive a sticker shock at the hard, quantifiable costs of hiring. The people and infrastructure that power Talent Acquisition are sizable and the more employees you need to backfill the larger these “hard costs” will be. However, this is only a fraction of the true costs associated with an organization’s inability to retain talent – in many cases the “soft costs” of high attrition might outweigh the ones leaders see on paper. The expense of internal knowledge drain, time spent interviewing, lost productivity of empty positions, onboarding costs, and ramping-up the productivity of new hires are immense.  Financially speaking, you’d often be better off recognizing and retaining the employees you have than going to market for replacement talent.

Erjona Shera

People Analytics at Wayfair

Why is it more beneficial for the company to retain employees than to hire new ones?

Attrition in a company comes with extra costs. One of the costs would be time spent to interview and time spent to onboard the new hire. Let’s assume a mid-senior role has a notice period of 2 months and it requires another 3 months to interview candidates and to have the new person join and that onboarding takes 3 additional months. That means that the team will have to hold for around 8 months waiting for the replacement and for the person to be onboarded. Another cost is lack of productivity in work due to missing headcount during all this time. This also comes with a risk of the remaining team feeling burned out due to handling extra work while searching for a replacement. Finally, hiring comes with a risk. You will not know for sure if the person hired will be right for the job and fit in the company culture until they go through their first review. If the company would have spent time and resources to retain the person in the first place, it would have maintained or increased engagement and productivity in the team and saved itself a lot of extra hours, effort and risk to hire a new person. By focusing on employee development, the company can increase retention and upskill existing teams so that they continuously strive for new ambitious business goals.

Richard S. Encarnacion

People Analytics Analyst at Healthfirst

Why is it more beneficial for the company to retain employees than to hire new ones?

When companies are successful at retaining employees, they can maintain a level of organizational knowledge which maintains organizational efficiency. When an organization loses their staff and hire new employees there is a 3–6-month learning curve where efficiency is lost due to the “catching up” the new hire must undergo costing an organization loss of profit.

Within our organization we have been able to calculate a total loss of 3.6million dollar loss in 2021 due to our voluntary turnover. We can calculate this combining recruiting cost, onboarding/training cost and loss of productivity

Gianluca Cepale

 Global HR Analytics Specialist at ROCKWOOL Group

Why is it more beneficial for the company to retain employees than to hire new ones?

It is a matter of time and time is money. Capitalizing from hiring processes as well as counteracting turnover costs is of utmost importance for organizations, whatever the industry and the size are. Moreover, whenever a job contract is signed, further related costs follow such as those related to the newcomer onboarding and training. Indeed, companies invest a lot of resources to make the newcomer more and more effective in contributing to the organizational business. Thus, the newcomer starts to familiarize with his/her tasks, role, job, people, and the work environment, all of that require a significant investment of one’s personal and structural resources. Consequently, it is quite easy to imagine that deploying a sustainable employability strategy may be more beneficial for both the employees – whose needs of growth are satisfied – and the employer – who don’t need to restart (and re-pay for) the hiring and the onboarding process once again. Retention policy as well as sustainable employability interventions have already shown their efficacy on employees’ health and productivity (Hazelzet et al., 2019).

Hiring an employee involves a significant cost for the employer. To drastically reduce recruiting and onboarding costs, it’s best for companies to opt for internal recruitment. Companies sometimes overlook a promising talent base: their own employees. It’s time for recruiters to focus on internal recruitment, employee training, and developing the skills needed for the future. To assist these processes EDLIGO offers AI-Powered People Analytics solution for data-driven and cost-effective talent management.

–       EDLIGO allows managers to evaluate the skills and competencies of their employees. EDLIGO platform provides you with a map of people’s skill gaps, and, on this basis, managers can use recommendations on how to fill the skill gaps in the most efficient way for their organizations. Companies will be able to create a strategy for improving and renewing employees’ skills so that they can save the cost of hiring new people.

–       EDLIGO enables structured and targeted talent mobility. The EDLIGO platform allows you to search for talent internally and create personalized development plans for employees in your company who need to advance.

–       EDLIGO platform helps companies identify top performers and future leaders in the organization, uncover great skills in the company, develop employees for the future, increase retention rate, and maximize employees’ engagement.

In summary, recruitment of an employee entails a significant cost for the employer. Far from being obvious, the calculation of the cost of recruiting an employee includes both direct costs (the recruitment process itself) and indirect costs (the rest related to the process).

To learn more about our solutions to minimize the cost of hiring by retaining the best talent, please schedule a call with our EDLIGO team.