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How Much Is Employee Turnover Costing You?
The high cost of employee turnover is a disease that can destroy an organization. Much like undetected cancer in an overtly healthy-looking person, it destroys from within. There are a number of reasons for this symptom, but for today we'll tackle the hiring process.
The high cost of employee turnover is a disease that can destroy an organization. Much like undetected cancer in an overtly healthy-looking person, it destroys from within. There are a number of reasons for this symptom, but for today we’ll tackle the hiring process.
Hard Costs - They Add Up Quickly A study evaluating the effects of the U. S. Family Medical Leave Act estimates the high cost of turnover for a manager can be as high as 150% of their annual salary. What costs are being considered?
* Advertising
* Recruiting fees
* Travel expenses for candidates and recruiters
* Relocation expenses
* Increased unemployment insurance costs
* Administration time - collecting resumes, scheduling interviews
* HR time - orientation, paperwork
* Management time - interviews, training, and development
But It Doesn’t Stop There - Soft costs can be difficult to calculate with any clear and precise numbers, but often overshadow hard costs. And the cost is more significant based on the critical nature of the position in question. Here are some general soft costs to consider:
* Intellectual property loss
* Loss of productivity during the ramp-up phase
* Morale issues
* Customer Satisfaction - the most important and often the most costly
Turning Around Turnover - It’s been said “Hire hard to manage easy.” Simple enough to quote but tough to follow through when you’re in the final two minutes and your team is down by a touchdown. And the smaller your organization, the more critical this issue becomes. Things like deadlines, mission critical processes, and business cash flow are heavily weighted factors.
Here’s a 5-step process to help you: 1) Match to the job - you cannot put a square peg in a round hole, so why try to make someone “fit” into a position? Pre-employment assessments are ideal to clarify what a “fit” really should be. 2) Structured process designed to screen out at each stage - this requires a negative bias toward the hiring process (i.e. rather to pass on a questionable candidate than risk hiring a bad one). Example: One recent client solution was to measure the number of significant employment gaps in the initial resume screening narrowed from 21 to 8. Phone interviews further narrowed from 8 to 5, which were given pre-employment assessments prior to a personal interview. 3) 70/30 Rule - let the candidate do most of the talking. Too often hiring managers in desperate situations try to “sell” the candidates versus determining a clear match for the job. Consequently, they don’t learn enough about who they hire before it costs them. 4) Behavior-based interviewing - discover what they’ve done in the past (without “leading the witness“) to determine what they are likely to do in the future 5) Set yourself up with objectivity as the key ingredient - have an experienced 3rd party participate in the hiring process. This could be another hiring manager or a credible outside source.
Using this formula to recruit only the best candidates, you can prevent costly mistakes and gain a competitive edge.