How to Calculate the Cost of Bad Candidate Experience
Learn how to calculate the cost of bad candidate experience and its impact on your business. Understand the significance of providing a positive candidate journey for long-term success.
The candidate's experience during the recruitment process has the power to not only shape how they perceive the company, but also influence the overall success and market reputation.
It begins with little things like applying for a job and continues throughout the entire process, including moments like not receiving any response to their application or not getting feedback after the interview.
The Impact of Candidate Experience on Business
While attracting talents is important, what happens to candidates who don't align with the job descriptions is equally significant! The truth is, that a negative candidate experience during the recruitment process can seriously damage a company's reputation and have a negative effect on your recruitment activities and other things.
This stems from a negative perception that can make candidates less inclined to engage with the company’s products or services. Research from the North American CandE Awards research supports this, indicating that 46% of candidates with a negative experience would shift their allegiance, purchases, and relationships to competitors.
Furthermore, the ripple effect of a bad experience can extend to the candidates’ social and professional networks, discouraging potential talents and customers. This scenario is evidenced by data from LinkedIn, revealing that 27% of candidates with a bad experience would actively dissuade others from applying, and 69% of such candidates would refrain from reapplying (Source: Talentegy).
This isn't just some assumption! There are actually companies out there who realized that their sales figures were affected by the dissatisfaction of certain hires. Take Virgin Media, for instance. They even went ahead and calculated how much money they were losing because of a bad candidate experience.
They came to this calculation: if there were 123,000 rejected candidates each year, and 6% canceled their monthly Virgin Media subscription, they would end up with about 7,500 cancellations. Multiply that by the £50 ($60) subscription fee and within 12 months, and Virgin Media was losing £4.4 million per year, the equivalent of $5.4 million. (Source: LinkedIn)
It's crucial to understand that your employees aren't the only ones acting as company ambassadors of your company—it's also the candidates, even if they didn't make it past the interview.
Candidates will start talking about their experience (positive or negative) with their friends and family, and, believe it or not, they are more prone to sharing their negative experiences than the positive ones. If a candidate had a bad experience, there is a high chance that they will not apply for a job in your company in the future and won’t recommend it to others either.
Considering the effect that can be created by sharing an opinion or experience on social media, you can tell that things could get very ugly for your company if one of your candidates had a bad experience.
A Leading Cause of Poor Candidate Experience
Communication, or a lack thereof, is a pivotal factor that significantly contributes to a bad candidate experience during the recruitment process. Candidates highly value effective and transparent communication and have expressed dissatisfaction with the quality of interaction or feedback received during their application or interview phases.
Consequently, it's crucial for companies to prioritize maintaining open lines of communication with every candidate, irrespective of the outcome of their application. Even those who are not ultimately recruited profoundly appreciate the acknowledgment and follow-up, valuing the respect and consideration it conveys.
The significance of this engagement is underscored by the fact that approximately 65% of candidates report that they never or rarely receive any notice from employers regarding the status of their application, highlighting a prevalent gap in employer-candidate interaction (Recruiting Stats to Know ). This lack of communication and feedback not only fosters a negative experience for candidates but can also adversely impact the employer’s brand and future talent acquisition efforts.
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How Expensive Is It Not to Follow Up With Candidates
I couldn't find a mathematical equation to measure the costs that companies face from the lack of feedback and negative experiences. So, I decided to develop one myself a few years back.
How to Calculate the Cost of a Poor Candidate Experience
Here's a simple math equation that can help you figure out how much your company might be losing because of a poor candidate experience.
(NCWF * CPA) + (NCWF * TA * PP * ARPC) = Your Potential Loss per Year
All the costs and numbers in those examples are based on surveys and public data.
You can even simplify the math equation like this:
Direct costs = NCWF∗CPA
Brand Damage = NCWF∗TA∗PP∗ARPC
Total Loss = Direct costs+Brand Damage
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 who 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 elsewhere.” 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.
Examples of the Costs of a Poor Candidate Experience
Imagine you get 10,000 candidates per year, review 7,000, and hire 70 candidates. And you never checked or gave feedback to 3,000 candidates who applied. Now lets check the costs.
(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 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. I mean, seriously, imagine having a terrible experience with a company and then, three months down the line, some recruiter from that same company contacts you. How excited do you think you'd be about the job opportunity with that company? Not very, right?
Acquiring new 3,000 candidates will cost you (CPA * Number of candidates).
In this case: $ 45,000 USD.
I know this math equation has many variables, but, as I mentioned earlier, I couldn't find any that would work, so I went ahead and created one myself.
Statistics About Bad Candidates Experience
27% of the candidates whose experience was negative would “definitely not” apply to the firm again (although 6% still would); 27% would “actively discourage others from applying.” (Source: LinkedIn)
And thanks to the 27% of candidates, your talent pool will be smaller, and the CPA will go up because it will be harder for you to attract more people into the process next time, especially when you are going to be hiring for similar roles.
And in 2019, that number has grown “69% of candidates with a negative candidate experience won’t apply again.” (Source: Talentegy)
Another study shows that 80% of job seekers say they would be discouraged from considering other relevant job openings at a company that failed to notify them of their application status. They would be 3.5 times more likely to reapply to a company if they were informed. (Source: Candidate Experience Study)
People who are satisfied with their candidate experiences are 38 percent more likely to accept a job offer (Source: IBM) 80% of job seekers say they would not reapply to a company that didn’t notify them of their application status (Source: Lever).
According to Talent Board’s research, it turns out that a 81% of candidates will share their positive candidate experience with their family, friends, and peers. Another 51% are sharing their impressions on social media sites like Glassdoor or LinkedIn.
With this in consideration, ensure to follow up with candidates. It only takes a few minutes to send rejection emails through any ATS, and most candidates appreciate receiving feedback.
Honesty in these communications is crucial; it aids personal development and keeps doors open for future opportunities. Simple, customized follow-up emails are neither complicated nor time-consuming but can make a candidate feel valued.
Offering positive experiences to all candidates is easy and avoids common managerial pitfalls. Before skipping feedback, consider the long-term resource implications and potential costs. Treating every candidate respectfully, as you would an employee or a top customer, is cost-effective and can bolster your brand. Negative experiences can have a lasting impact, with repercussions spreading through word of mouth.
Treat every candidate as you would your employee or your best customer because every candidate could refer a strong candidate even if they don’t get hired! And it costs $0.00 to respect your candidates and give them feedback.
How you treat your candidates matters!
Things That Are Often Overlooked...
You know, those little things that tend to slip under the radar and have the biggest impact on candidate experience. They could be easily improved! There are many of them, but let's focus on these three - they're the most important ones.