Your best employee just left. Longtime customers are upset, because your company doesn't seem to know anything about them. Commitments and promises are being broken. Pending deals and prospects are being abandoned and falling through the cracks.
The hiring process is a minimum of one month, and worse, even an experienced replacement will take three to six months to become productive.
Oh yes…this is the third person to leave this year, taking your turnover rate to 27%.
Is this a training and orientation issue? Is your staff leaving because they don't understand or know how to do their jobs? Perhaps? Or, was this person in the wrong job to begin with?
Even when you are under pressure to quickly fill an open position, you'll save yourself a lot of trouble and money if you take the time in advance to get very clear picture of the “right person.”
A recent study conducted by Harvard University indicates that eighty percent of staff turnover is due to hiring mistakes. A fifteen-year survey of more than 20,000 hiring executives found that roughly fifty-six percent of newly hired executives fail within two years of starting new jobs. At that rate, when hiring leaders for your company, you'd be better off flipping a coin.
Some managers still attempt to motivate through intimidation, with an attitude of, “If you can't get the job done, I'll find someone that can.” If that owner knew how much staff turnover really cost him, he'd work a little harder to make that employee productive… Or, he'd work a little harder on the hiring process and place the right person the first time.
Finding and hiring the right employee can make or break a company. Companies that do it well tend to perform better financially, have lower turnover rates and have stronger reputations within their market.
DePaul University conducted a study in 2007, which found that one quarter of businesses surveyed had over twenty percent turnover per year. (Turnover is defined as non-voluntary terminations.)
What's the True Cost of a Bad Hire?
According to a study by the Corporate Leadership Council, hiring the wrong executive can cost an organization as much as three times that person's annual salary. A Right Management survey found that a “bad hire” cost up to five times their annual salary.
With a real cost of as much as five times annual compensation, making the right hiring decision is important to your company's health.
How Do You Determine True Turnover Cost?
- Direct Hiring Cost
- Training Cost
- Reduction in Productivity
- Quality Costs
- Benefit Administration
- Increases in Unemployment Insurance Rates
- Severance Costs
- Recruiter Fees
- Notifying Unsuccessful Candidates
- Management Costs
- Resume Handling Costs
- Drug Screens
- Background Checks
- Security Investigation
- Reference Checks
- Customer Satisfaction Impacts
- Employee Satisfaction Impacts
- Coworker/Supervisory Informal Training Impacts
- Payroll Administration
- Computer Security
- ID cards
- Business Cards
- Email Accounts
- Security Modification
- Leasing Costs
- Position Vacancy Costs
- And what about just the Aggravation Factor?
What Does a Bad Hire Look Like? How Do You Identify a Bad Hire?
In the industrial economy, a company's worth was asset based. Now that we are solidly in the Information economy, a company's value is based more on intellectual property, systems and teams. With that shift, employee alignment is now more important than ever.
Employee alignment is the concept of matching a worker's skills and characteristics with positions that require those same skills and characteristics.
Makes sense, doesn't it? Although it appears to be common sense, application of this concept is quite uncommon. Corporate America has a long history of forcing round pegs (employees) into square holes (their jobs.)
Recent research by Cornell University studying employee alignment found that thirty-three percent of employees don't match their company's corporate culture. Thirty-three percent of employees were not in the proper job, and fifty percent were not trained for the future.
Employee alignment recognizes that different people have different thinking and decision-making styles or tendencies. Likewise, jobs and tasks require different skill sets and are more effectively, and efficiently completed by people with similar skills.
For example, although you may be right handed, you may still be able to write with your left hand. It may be awkward, uncomfortable, or illegible, but you can do it. Although you know and understand accounting principles, you may feel awkward, uncomfortable and inadequate with the structure and requirements of an accounting role. Likewise, the accountant might have a difficult time in the customer service call center, or with the responsibilities of the sales manager.
A person in an inappropriate job must work harder just to compensate for requirements that are unnatural for them. Their productivity and creativity is stymied. Employee alignment addresses these inherit differences we all have, and seeks to put the right people, in the right place, doing the right things.
