Talent shortage is the biggest hiring challenge today. In a recent Harris Poll of 515 U.S. human resources and business managers conducted for Glassdoor, 48 percent of respondents said they are unable to  find enough qualified candidates to fill open positions, and 26 percent of respondents anticipate this to become a larger problem in the coming months.1 In the face of this challenge, many employers are devoting even more resources to talent searches, assuming that finding the perfect candidate will deliver better ROI than developing existing the skills of existing employees.

Hiring new employees presents its own challenges and may be more expensive than many employers realize. According to a U.C. Berkeley study, it costs $4,000 on average above salary and wages to hire a new employee, a figure that rises to $7,000 for replacing management-level employees and professionals.2 Moreover, the Center for Economics and Business Review has found that this cost increases for smaller businesses, consuming a higher proportion of non-wage expenses such as administrative costs.3 And of course, if you're an employer who offers benefits, you have to factor these in as well - and they can total 1.25 to 1.4 times the employee's base salary, MIT's Sloan School of Management reports.4 Before you start looking to hire new employees, consider the advantages of developing the talent you already have.


Cost is one of the biggest drawbacks of hiring new talent. Some studies suggest the cost of hiring new employees is even greater than Berkeley's research indicates. The Society for Human Research Management estimates that the cost of directly replacing an employee can run as high as 50 to 60 percent of their annual salary, and total associated costs of turnover can rise to 90 to 200 percent.5 For example, according to the Association for Talent Development's 2014 State of the Industry report, the turnover cost of replacing a human resources manager can be $133,000. In comparison, the average annual cost of training and developing a new employee is just $1,208.6 Turns out, training current employees is much more cost-efficient than hiring new ones.


Hiring new employees also costs employers time. The Society for Human Resource Management's study identifies the cost of time associated with replacing new employees, including time spent by human resources personnel handling exit interviews, payroll administration and benefits, time spent by managers on retention efforts and exit interviews, vacation and sick time taken by departing employees, the costs of finding temporary coverage during the replacement process, and production delays and other disruptions caused by the employee's departure.

Then there are time costs associated with talent searches, which require time spent writing job postings, interviewing, screening, hiring, on-boarding, training and handling and compensating for mistakes that new employees make during their training stage. The time spent training a new employee is a fraction of the time lost during the overall turnover and hiring process. None of this extra time is lost by simply investing in developing current employee skill sets instead.


Developing your current talent gives you more flexibility for delegating responsibility and encouraging employees to take on multiple roles and responsibilities. Training internally allows for more specialized talent to be deployed when needed, such as for when more help is needed for a priority project or to for filling in for sick or absent employees.

Management Potential

Another advantage of investing in the skill set of your current employees is that it enables you to develop future managers. You can avoid the cost of hiring new talent and ensure that new managers will be a great culture fit by training them internally. This also benefits your current managers by giving them assistants to delegate tasks to, while it prepares your team for a smoother transition when existing managers move on, take time off, or retire.

Training Future Trainers

Finally, as employees gain new skills, they also become potential trainers themselves. When one employee learns a new skill set, it becomes easier for them to assist others with on-the-job training. Investing in one current employee can have a multiplier effect that indirectly helps you train multiple staff without added cost.

Penn Foster offers a suite of employee developement and training solutions to help upskill your existing employees. To learn more, click here.

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Resources: Photo Credit. (1) Talent Shortage is Hiring Managers' Biggest Challenge, Glassdoor Recruiting Survey Reveals (2) How Much Does it Cost to Hire a New Employee? Lots. (3) The True Cost of Hiring An Employee? Much More Than Their Salary (4) The Cost of Hiring A New Employee (5) Retaining Talent: A Guide to Analyzing and Managing Employee Turnover (6) 2014 State of the Industry Report: Spending on Employee Training Remains a Priority