How Effective Hiring Can Make You Money
If you’re like me, you may be planning for the year ahead, and that likely includes your staffing plans. Who will be leaving due to retirement? What positions will need to be added in order to meet your goals?
If you have positions to fill, that means you’ll need to do some hiring. Do you see the cost of hiring a new employee as an expense or an investment?
I recently had an executive tell me that hiring was the most important thing he does in his job. When he’s hiring, he knows he’s bringing a person on board who will typically be with the organization for years to come.
When looking for that one person can either make things better or worse for their co-workers and those they serve-it’s important to remember that there is a compounding effect of every person hired into an organization.
If you see hiring employees as an investment, you want to realize a return. Although you can look at this on an individual basis each time you have to hire someone, I encourage you to approach it in a broader way by looking at the hiring process itself.
Are the people you hire highly productive? Are they staying around for more than a year? Do they have a positive, synergistic effect on the rest of their team?
As you start to ponder the answers to these questions, you’ll begin to understand how an effective hiring process is crucial to the overall success of an organization.
Small Companies, Big Challenge
As an HR consulting firm with clients categorized as small to medium-sized companies, we often get requests for assistance with hiring staff. These companies come to us because they realize they don’t have the time to do it effectively themselves or because they’ve been doing it themselves for years with little success.
I once worked with a business that pulled their new employees from the pool of friends and relatives of current employees. They thought, “If Jill is a good employee and this person is a friend of Jill’s, he must be good too, right?” Without a doubt, it’s a fast and inexpensive way to hire.
Sometimes they got a good employee, and sometimes they got a person who didn’t fit with the team or who was not as capable of doing the work. However, the most damaging effect was that over time, the organization became rife with interpersonal drama, playing favorites, and frustration with the lack of high performance.
But for small employers, making the jump to paying for advertising, testing, the time to screen resumes and conduct interviews, or paying someone to help create a better hiring process is often difficult. Having a smaller company often means having smaller financial resources.
It requires balancing the short-term cash flow reality with hiring as a long-term investment. What is a solid hiring process worth?
If your recruiting and selection process results in consistently hiring employees who are a good match for the job, the team, and the organization’s culture, the payoff will come in the form of both tangible and intangible returns. Let’s break those down.
- Reduced hard dollar costs of an unsuccessful hire include:
- Unemployment claims and resulting costs
- Legal fees
- Severance payments
- Cost of hiring a replacement hire: job postings, testing, and background checks
- Reduced soft dollar costs of an unsuccessful hire include all the time it takes to get a new person to a produced level:
- Screening, interviewing, and background checking
- Reduced time spent on performance management of individuals who are a bad fit
- Increased productivity of the new hire and the rest of the team
- Increased employee morale of the individual and the team
- Improved goodwill with customers and business relationships and improvement of the organization’s reputation
Reduced expenses, increased time on productive activities, and improved relationships all put more money in the company wallet! So, what does it take to get this kind of significant return?
The investment you’ll need to make boils down to spending money on two types of tools:
1) Tools that ensure you’ll get a good pool of candidates, and
2) Tools that ensure you select the right person from the pool.
If you’re aware of the cost of using your time on hiring versus other value-added and revenue-producing activities, you may choose to bring on an HR consultant to review and improve your process, teach you to make sound hiring decisions, or conduct the process for you.
All of these costs are short-term and finite, whereas many of the returns are long-term and infinite.
Hiring a person who is well-suited for a job, as well as the organization, is an art, not an exact science. An art, by definition, is open to failure. However, experience has taught me a lot about hiring well. Using a structured approach to hiring dramatically increases the odds of success.
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