When Companies Burn Money They Don't Have...

Much has been said and written of late about how companies have no one but themselves to blame for their hiring challenges.  PBS blogger Nick Corcodilos has made a career out of it, as have authors as notable as Wharton professor and WSJ contributor Peter Cappelli who has written extensively about the topic as well.  Their basic consensus is that the so-called "talent shortage" is nothing of the sort.  Companies simply don't know how to recruit, and the resulting frustrations are - more often than not - their own fault.

But somehow, reading about this issue never quite compares to encountering it in person.

Over the past month, I've been in talks with a boutique consulting firm regarding a possible opportunity they recently posted on Linked In.  A mutual acquaintance not only connected us but also wrote one of the most flattering recommendations I've had the privilege to receive.  A phone interview was arranged shortly after, followed by not one but two face-to-face interviews with the owner and her team.  The day after the final interview, I was sent a form and told I had to complete it and list some references that could be checked before an offer could be extended.  I did so and eagerly awaited a reply. 

A week later, nothing had happened and none of my references had been contacted.  I wrote the HR manager to see if there had been any developments, and this was the reply I received (identity redacted):

 ----- Forwarded Message -----
From: XXXXX XXXXXXXXX <xxxxxxxxx@companyname.com>
To: John XXXXXXXXXX <jxxxxxxxxxx@xxxx.com>
Sent: Friday, February 15, 2013 7:10 PM
Subject: Re: Information Request

Hi John – We aren't quite sure what direction we're going with the position we had in mind for you.  Once we all can touch base and figure out a plan, I will get back in touch with you.
Have a great weekend!

[Name Withheld]
Human Resources Director
[Company]

So, apparently, after three interviews and some discussion, the company is now undecided as to whether it does in fact have a position to fill.   I've written about this experience before a number of times when companies interview a candidate - sometimes inviting them to travel great distances - only to cancel the position or hesitate to extend an actual offer even after the candidate has cleared the final hurdles. 

As frustrating as this can be for the candidate, it's also extremely unhealthy for the company's bottom line (all the more so if the company in question is in fact a boutique consulting firm or similarly sized small business).  To illustrate using just some back-of-the-envelope figuring, let's assume it costs a company $100 an hour to compensate an employee in terms of salary and benefits.  (Yes, the actual number may be higher or lower in some instances, but let's work with a whole number for illustration purposes here.)  Here's what Company X has already spent to interview a candidate that they're now getting cold feet about hiring: 

$300 - Cost of developing content for a job position listing (assume 3 hours of one staffer's time - bear in mind the actual cost is likely to be far higher if the ad has to be approved or reviewed multiple times by higher management before posting)

$200 - Cost to post an ad.  (Again, mileage may vary here depending on the Web site used, the number of clicks, how long the ad runs, etc., but let's just go with this for the time being here.)

$300 - Cost to review responses to the ad by just one staffer (assuming s/he spends at least 3 hours doing so)

$100 - First phone interview by one person

$300 - First face-to-face interview with three employees (assuming the interview lasts exactly one hour only vs. 90 minutes or more)

$300 - Second face-to-face interview with three senior managers (similar time assumption)

$300 - Cost for three senior managers to spend one hour discussing whether to move forward with extending an offer

Total Cost:  $1800 minimum

Bear in mind the actual cost to the firm in terms of time wasted is very likely to be far higher since this calculation does not include additional costs for reviews and revisions to the posted advertisement, scheduling requirements for internal staff, or the other candidates the firm may be interviewing as well, etc.  Taken together, the likely costs are probably several thousand dollars in lost time and productivity, to say nothing of the frustration that results on the part of candidates who may take time away from other promising opportunities and interview at great personal expense in terms of travel, parking, subway fare, etc. only to be essentially told at the end of the process, "We're not sure whether we want to make a decision at this time."  These candidates will likely dissuade others from applying to the company, and if this word-of-mouth goes digital, the company will find itself at a disadvantage in terms of being able to recruit the talent it needs to remain competitive. 

That will do more to create a talent shortage than anything else.