A challenging time to hire and retain talent in healthcare & life sciences is a good time to assess the true cost of talent and bust some of the myths that obscure it.
A few years ago, I co-wrote an article with my brother examining the true cost of talent. Much has happened since then – on an epic scale. The pandemic and global shutdown have had far-reaching ramifications for business, including the cost of talent. It’s a topic well worth revisiting. There are a lot of open positions in healthcare and life sciences and chances are some of them will be yours to fill. Talent shortages are widespread, yet the true cost of talent remains shrouded in myth.
This is a challenging time to hire and retain talent in healthcare and life sciences. But it is still a great time to be in the field. The reasons you entered it – to discover, innovate and heal – have been enriched by data that can give us deeper understanding of just about everything. With unprecedented access to information, figuring out the cost of finding the right people should be easy: Add up the cost of retained search with the costs of posting and promoting open positions, and voilà – you have the cost of talent.
If only it were that simple!
Myths about the cost of talent generally stem from a failure to see the forest for the trees. To get an accurate picture, you have to step back and look at the entire talent lifecycle. From this perspective, it becomes apparent that the cost of talent is not just the cost of talent acquisition. Talent costs can be incurred (or saved!) at any stage, from succession planning to onboarding, training and development, management and retention. Yet companies still focus only on reducing the acquisition costs of talent.
This not only overlooks the rest of the talent lifecycle; it also leaves out a crucial factor: the cost of vacancy (COV). A vacant position represents a big financial exposure for your company. One that extends far beyond recruitment and job board expenses. But just how far? Vacant early-in-career posts drive losses of $7,000 per day, while key executive vacancies can cost as much as $1 million a week.1 Another estimate puts the COV at 400% of the annual salary for a high-level or highly specialized role.2
As staggering as these numbers can be, they offer only a baseline metric. Soft costs, due to lost productivity, lower morale, missed revenue targets and other factors, are more difficult to quantify but no less injurious. Every day that a position remains vacant damages the business. The time to market of revenue-driving products is delayed, and first-to-market advantage can be lost irretrievably.
The high cost of losing talent is yet another factor in the COV equation. Especially in a tight post-COVID talent market, with competitors actively enticing people with higher salary offers, having your team members overworked and demoralized poses a high risk of attrition. The importance of talent retention should not be underestimated. McKinsey reports that people-focused companies have the lowest attrition rate, at 7.9%.3
If your talent lifecycle starts when you post an open position, you are getting a late start – and the costs are already mounting. This can be avoided with proper succession planning. Yet the importance of this proactive approach is often underestimated. In a member survey by the Society for Human Resource Management, 56% of HR professionals said their organization doesn’t have a succession plan in place.4
Companies neglect succession planning at their peril. According to Harvard Business Review, the amount of market value lost to poorly managed CEO and C-suite transitions in the S&P 1500 is estimated at nearly $1 trillion a year.5 As we saw during the pandemic, a vacancy can occur at any time, in any position, no matter how high up the ranks.
Optimal succession planning means having a deep bench with at least three potential candidates for each key role. Avoiding high-level vacancies by “pre-filling” your key leadership posts is a wise move that can drastically reduce your cost of talent down the road.
A realistic assessment of the cost of talent must consider not only the cost-to-fill metric, but also time-to-fill and time-to-hire metrics. Time-to-fill spans the recruitment process from the moment a hiring manager submits a job request to HR or when an opening is approved. Time-to-hire begins when the first candidate applies for the role. Both conclude when the chosen candidate accepts an offer – and both measure the efficiency of your internal recruitment processes.
In its benchmark study on talent acquisition, Bersin by Deloitte put the average time-to-fill at 52 days.6 Executive roles can take much longer. But this isn’t even the whole story. Time-to-fill only accounts for the time your team actively spends filling an open position. Equally important to consider is the time lost in terms of productivity that would otherwise go toward your bottom line.
There are stumbling blocks strewn along the talent acquisition path which can delay the process. For example, after a finalist has been selected, it is still possible for another company to swoop in and hire them if your hiring manager does not move quickly. This means writing off the time your team invested in interviewing and assessing candidates, extending your time-to-hire and adding to your cost-to-fill.
To make matters worse, the longer a role is vacant, the longer it is likely to stay that way. After 60 days, a vacant role will typically remain vacant for six months or more. It’s reasonable to conclude that what HR industry analyst Josh Bersin calls traditional “post and pray” recruitment isn’t working. A 2022 study from The Josh Bersin Company found that 75% of companies struggle to recruit effectively.7
So, Myth #3 is half true. The research, and the anecdotal information I have gathered over the years, show that when companies manage the talent lifecycle in house, filling a vacant position can take many months. Sometimes even a year or more – racking up costs by the day, often unbeknownst to the CFO.
The real myth is that this is how it has to be. The long duration of talent acquisition is an accepted norm. I am here to say you don’t have to accept it. Here are a couple of cases that illustrate the point:
A life science firm engaged Boyden to find a medical director for a highly specialized therapeutic team. We identified over 226 highly qualified candidates and interviewed the most promising within three weeks of partnering with the client. Within one month, our client had interviewed all of our handpicked candidates and hired two of these talented physicians to run their industry-leading team within three months. Conducted in-house, a specialized search like this typically takes at least twice as long.
A global pharmaceutical firm asked Boyden to find an executive-level specialist physician for their U.S.-based business. The desired candidate profile was decidedly rare: a diversity hire who was clinically credible and already a key opinion leader. Boyden rapidly reached out to 200 potential prospects. Within three weeks we had identified six finalists. The client successfully hired and onboarded one of these candidates, a female senior executive physician, shortly afterward.
The time difference, and hence the cost difference, is dramatic. This is because we do search differently. Technically we don’t search at all. We don’t have to, because the candidates are already at our fingertips. Our candidate pools are deep. Our networks are vast. And our process is efficient: 86% of the time we identify the finalist candidates by week three. Compare that to three months, and you’re looking at a drastically lower cost of talent.