It’s Cheaper to Train Than Recruit

by Sharlyn Lauby on April 5, 2012

I learned a long time ago that in business it’s cheaper to keep the customers you have than to continuously attract new ones. That’s not to say companies shouldn’t always try to get new customers. But there needs to be a focus on keeping training, development, employee training, acquisition, customer service, recruitthe customers you have for two reasons: first, you already spent the cost to acquire them and second, because you’ve already won them over to your brand.

Businesses stay focused on keeping customers by knowing the cost of acquiring a customer and the customer’s satisfaction with their product/service. In addition, they know the cost of losing a customer.

Occasionally, customers leave for all the right reasons. For example, when they outgrow the needs of a product or service. But they remain raving fans of the company – because that company helped them grow and succeed.

If we think about it, the same philosophy applies to employees. When a company hires an employee, they invest a lot of time, energy and resources in sourcing, advertising, interviews, offers, etc. Then the new hire goes through orientation and onboarding. They might participate in other kinds of company training. Their supervisor spends time talking with the employee about performance expectations, departmental policies and more.

My guess is the company has thousands of dollars invested in this new employee.

So when the employee makes a mistake, instead of immediately thinking warnings, discipline and possibly termination, maybe we should consider coaching, mentoring or additional training? After all, the company already has a lot of money invested in this employee.

Another way to look at it is examining the cost of hiring an employee and the impact of employee satisfaction. Along with the cost of losing an employee.

Like customers, sometimes allowing an employee to leave the company is exactly the right thing to do. Maybe the company can’t give them what they need. Letting an employee pursue their professional goals, even if it means them leaving the company, could turn them into a raving fan for your business.

I know, I know, it can be a pain to fix employee situations and customer complaints. On the surface, it might appear easier to find another customer or hire another employee. But if we’ve already made the investment, it might make sense to look for alternatives to abandoning the relationship.

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{ 16 comments }

Devan April 5, 2012 at 11:48 am

Great points, Sharlyn –

Although some believe if they’ve made a mis-hire, they should just cut the cord and cut their losses. But I agree with your point – maybe it’s worth investing in coaching or training to help get the employee on track. And like you said – it’s cheaper! Have you read Bradford Smart’s book, Top Grading? If I remember correctly, the cost of a bad hire was estimated around 24 TIMES the employee’s base salary. Eeek!
Devan recently posted..Strategic planning: Getting back to why you started your business in the first place

Mangala Durwinka April 6, 2012 at 3:52 am

Facts are absolutely true.. The demands of the current businesses are getting higher and higher.. The supply of labour is very limitted with right Quality.. Although best fit is always not possible, Training would eneble the business to realign them as appropriate.. I believe the first few months of new entrant would determine whether the business is going to have a longer term resource or not..

Sharlyn Lauby April 6, 2012 at 12:50 pm

@Devan Thanks for the comment and sharing the resource. Hope you don’t mind that I added the link so others can read it as well.

@Mangala Thanks for sharing your thoughts!

Paul Brinkman April 10, 2012 at 1:25 am

Hi Sharlyn, This article is a treasure trove of truth. Among the insights: staff leaving for the right reasons. Over the years, I’ve counseled staff through transitions to something better for them beyond the current enterprise. Some returned, some became our consultants, some simply stayed in touch…with an occasional referral. If anyone in business wants to truly pay it forward, I highly recommend they read and apply the subtle insights here in your post. Best to you in your work.

Sharlyn Lauby April 10, 2012 at 9:54 am

Thanks for the kind words Paul! Have a great day.

Kim Wise April 11, 2012 at 11:47 am

I’m delighted to have just discovered your blog. I agree that it is almost always cheaper to train than to recruit. Where you recommended coaching, I would have said Mentoring – which is more structured than coaching.

Historically, formal mentoring programs were for 6 to 12 months, but we have been seeing a trend towards short 6 to 8 week mentoring programs built around specific needs or skills that can and should be mastered in a short amount of time. Again, a lot of people think of this as “coaching” – but with the right mentoring program software, the goal setting and results measurement can be tracked and quantified.

Best regards, and we will be back to hear more from everyone at the HR Bartender blog!

Kim

Nate April 11, 2012 at 3:13 pm

Great article!

It’s true that these days it can be really hard to train a new employee especially if it is taking the new hire a while to learn the position. A great way to reduce this stress on the company’s financials and trainers is to find applicants that are a great fit for the position. Two ways to reach qualified candidates is either through a recruiter or niche job board. Niche job boards offer qualified candidates that require less training than the large general job boards in which jobs receive a ton of spam resumes.

Sharlyn Lauby April 11, 2012 at 4:56 pm

Thanks for joining the conversation Kim and Nate!

@Kim – Agreed. Mentoring and coaching can be valuable.

@Nate – It always starts with a good hire. ;-)

Steve Borek April 23, 2012 at 2:58 pm

Even if this economy, the number one challenge employers face is finding qualified people.

So, it’s in their best interests to train and hire a coach to help increase performance. The ROI is huge!

Thanks for the post.

Sharlyn Lauby April 23, 2012 at 5:00 pm

Thanks for the comment Steve!

Corey Feldman April 27, 2012 at 2:10 pm

I think some turn over is a positive thing. But I am a strong believer in coaching, counseling, mentoring. Unless they totally snowed you in the interview there was a reason (hopefully a good one) that you hired them!
Corey Feldman recently posted..Follow Friday #1

Sharlyn Lauby April 27, 2012 at 4:15 pm

@Corey – Agreed, not all turnover is bad. Hopefully, companies aren’t getting snowed during the interview process. But we’ve all made at least one bad hire.

Lee Burbage July 1, 2012 at 12:52 pm

If you are geeky about this stuff like I am you will love reading Peter Cappelli’s ‘Talent on Demand.’ It is the history of talent development and all the angles. It is the gospel on this topic as far as I am concerned.

Sharlyn Lauby July 2, 2012 at 9:14 am

Hi Lee. Thanks for the comment. I’m very much a geek. ha.ha.

Will have to check out Cappelli’s book. I added a link so others can as well.

Dave "theHRCzar" Ryan July 17, 2013 at 8:10 pm

Ok so I am a little late to the party… but still a GREAT post Sharlyn, this one is going to all my supervisors. Thanks for sharing!!!
Dave “theHRCzar” Ryan recently posted..A Necessary Evil – Book Review

Sharlyn Lauby July 18, 2013 at 9:01 am

Thanks for the comment Dave!

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