We spend up to 70% of our total costs on salaries. But preferably 0% on hiring tools

We spend up to 70% of our total costs on salaries. But preferably 0% on hiring tools

As a CEO or Founder, you (hopefully) know how important your team is. In fact, our companies’ teams are so important, that we are willing to spend up to 70% of our total costs on salaries. 

It’s actually ironic that we spend a huge amount of money on our people, but preferably nothing on the process to hire them. It’s the never-ending struggle and frustration for every Head of People or Recruitment Manager that there are endless budgets for commercial teams, but nothing for them. Quite foolish if you think of it, isn’t it? Especially considering that we also make a lot of mishires along the way, as a result of acting on subjective assumptions, instead of objective insights that a lot of tools (also cheap ones :-)) can provide you with).

Did you spend money last year on company sweaters or beers on Friday, but not so much on hiring tools? Then I’d advise you to read this blog. I promise you it’s gonna be an eye-opener. 

After reading this blog, you will know:

The biggest challenge you’ll face in 2022 as a Founder or CEO

Yes, product-market fit matters. A good product matters.  And the motivation of the founding team matters. But even if all these boxes are ticked, it’s still not a guarantee for success. It’s the people in our teams that are responsible for transforming our dreams and ideas into reality.

Thought 2021 was a tough year in recruitment? Brace yourself for 2022 – where balancing everything at once will be your biggest challenge. The future of hiring does not look like anything you’ve known before. Those days when there was a large, talented and qualified talent pool to pick from are over. 

The greatest challenge for you, as a founder, that will keep you from growing your business in 2022, is being able to do this with the right people on board. 

However, with companies fighting over attracting, hiring and retaining top talent, 2022 will mark the year in which candidates are in a luxury position because the War for Talent has never been more intense than now. Let’s be honest. Apart from the very well-known, prestigious enterprises that have the luxury of choosing between hundreds of job applicants for a traineeship, we’re all struggling with getting the right candidates in the pipeline. Or even getting candidates in at all. 

The painful truth is that our HR and people-related decision-making processes are all about fear. Fear of not being able to hire the right person. Fear of rejecting the wrong candidates. And the fear of not having enough candidates to pick from.

The result? You opt-out for trusting your instincts (and you’re not alone – around 2/3 of CEOs & founders rely on gut feeling when making decisions). However, trusting your gut feeling can be the most foolish thing you can do, especially, financially speaking.

Why it would be financially foolish to make gut-driven hiring decisions

Of course, there are times when trusting your gut can be beneficial, however, the issue lies within the fact that the majority of founders don’t know when they should be relying on their gut and when not. 

Time for a quick reality check. Let’s say you are the founder or a CEO of a company with 100 people. If you reached this point, it means that you’re growing successfully. And you probably spend on average 70% of your total costs on personnel.

This is an enormous percentage and probably your largest cost category, asking for highly responsible decision making when it comes to people-related decisions.. On top of personnel costs, there’s also the costs of a mishire, which you’ve probably made a few times. In Europe, the average cost of a mishire is around 50,000€. Ouch.

70% of your total costs. And risking another €50,000 per mishire. When being really honest to yourself, that’s not the part of your business where you can just play around on your instinct, right?

Why invest in hiring tools instead of company sweaters and Friday drinks 

Many C-level decision-makers are without a doubt familiar with the concept of hiring tools but are actively choosing to not use them as a strategic growth simulator. Especially when you’re on a budget, it’s easy to get into the mindset of doing what is cheapest right now to save money. 

That’s why many founders choose to not invest in hiring tools. Instead, choosing to spend the hard-earned money on things such as company sweaters and Friday drinks (which is not necessarily a bad thing, but it might be a bit imbalanced.. ;-))). Now, let’s do some simple maths.

Let’s assume that the price of one company-branded sweater is 30€. If your company size is, for example, between 50 and 100 people, then on average, you will be spending between 1500-3000€ on a one-time thing.

If you organize bi-weekly Friday drinks with the whole team of 50 to 100 people and allocate a budget of as little as 10 euros per person for drinks/food. That’s between 500€ and 1000€ for just one evening. Now, that’s around 12000-24000€ per year.

Choosing to spend money on salaries, branded company shirts and everything else but investing in hiring tools.

However, drinks and company-branded sweaters are not what will build (or, as a matter of fact, sustain) your culture. Yes, it’s what will make things more fun, but it’s definitely not what will set up your business for success. Unless you’re a bar or a nightclub.

If you care about your teams (and the success of your company) as much as you say you do, invest and prioritize measurably better long-term solutions when building teams. 

Invest in HR tools.

Don’t want to end up being the Founder or CEO that people make memes about? 

Hiring tools are proven to improve both hiring quality and efficiency, however, many CEOs and founders choose to not invest in this.

Here at Equalture, we’ve built our own set of neuroscientific games – validated assessments, but in a gamified format. With these assessments, you can get to know a person on different levels, to objectively and accurately assess someone’s fit with the team, culture and job:

  • Cognitive abilities & analytical intelligence;
  • Behaviour and personality;
  • Cultural preferences.

Want to try this game yourself?

A visual of one of the games that is non-cheatable and measures a specific skill/personality trait.

The result: At the start of the hiring process, you already know everything about your candidates that you’d normally only know at the end. And on top of that, you collected this info objectively, instead of subjectively.

And if you’re already spending around 70% of your total costs on salaries – it’s about time you make them count.

To conclude

Now marks the time to decide how you’ll act on it for your business to successfully survive & shape the new normal we’ve entered. So, why not use the money you would normally spend on branded sweaters and Friday drinks on things that actually matter & are guaranteed to lead to success – building a company culture and teams that are future proof.

After all, winning teams grow your company.  And bad hires kill it.

Good luck, and in case you need any help, you know where to find us!

Anete Vesere

Cheers, Anete

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