Is Employee Turnover Killing Your Business?
August 9, 2008 · Print This Article
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By Joseph Skursky
The high cost of employee turnover is a disease that can ruin 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 evaluated?
• 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 & development
But It Doesn’t Stop There
Soft costs can be difficult to calculate with precision, 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 step – 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.
Article Source: http://www.leadershiparticles.net
Joseph Skursky guarantees that his clients will hire top talent using proven effective interviewing solutions and assessments for recruiting. To discover how you can become more competitive, improve profits, and eliminate costly turnover, go to www.topgradetalent.com FREE Teleseminar – Dominate Your Marketplace, Part 1: Hiring Strategies from Resume to “You’re Hired” at www.topgradetalent.com/teleseminar.htm
As you point out, hiring the right person is extremely important. But great hires can very quickly become poor performers if they aren't managed correctly.
Most managers use the traditional top-down command and control approach to managing people. Unfortunately, this approach naturally demotivates and demoralizes employees resulting in very poor performance.
To better understand this truth and an alternative approach to managing people which inspires them to be very high performers who love to come to work, please read the article "Leadership, Good or Bad"
Best regards, Ben
Author "Leading People to be Highly Motivated and Committed"
I don't know if I'd go so far to liken employee turnover to a cancer, but you bring up a lot of good points and the "hire hard to manage easy" rule is def in my personal philosophy. The one issue that isn't brought up here, though is that — and this has been brought up by other folks, like most recently Malcolm Gladwell — we can interview until we're blue in the face: the only real way of assessing a candidate's worth is by observing them on the job, in the field.
That's part of why I think employee turnover is also linked to hiring practices. I won't carry over the debate from other online communities, but imho recruiting markets like Dayak, which are applying the priceline model to staffing, make much more sense than typical job boards because of the probationary period. Hiring managers need a way to put their candidates on the job at no financial risk — even if the price on the employee's head is greater as a result. Monster and Craigslist get you diamonds in the rough, but the best recruiters are head and shoulders above because of the trial run. I speak from personal experience when I say this: employee retention skyrockets when you can actually see candidates in action before committing.