Phillip Stanhope (4th Earl of Chesterfield) in 1746 wrote a letter to his son, and said, “If a job’s worth doing, it’s worth doing well.” How many times have you heard this quote? It is still true today after nearly 300 years.
What does this quote have to do with the Cost of a Poor Hire? Everything. Poor hires are, most often, caused by company team members taking shortcuts in the various steps of the Talent Attraction Process.
When a company puts the same type of due diligence in Talent Attraction that it puts into the acquisition of a company, the company will become more profitable because every hire contributes to the bottom line or becomes a larger cost item.
What Are The Spreadsheets?
When I train Managers on how to become more effective in interviewing, I like to get their attention WHY they need to become more effective interviewers.
Twenty years ago, I used two spreadsheets while training a small consulting firm on effective interviewing. The firm felt that this topic was so important that every member of the firm, including the CEO and CFO, participated.
This was my first exercise – examine the cost of a poor performing hire for their firm. I only gave them the hard costs of an employee who earned $40,000 per year. The assumption was it took management two years to determine the employee was underperforming. We broke the managers up into tables of 6 with the newer managers sitting together, the midmanagement team together, and finally, the executives sitting together. The CEO and CFO agreed to these assumptions prior to my training. I created two columns. The first column, Costs, was created to list potential costs. The second column, Company (I use the Company name in training), is for costs that the company typically spends.
The first spreadsheet lists the direct costs (Employee Salary $40,000 for 2 years, benefits, Manager recruitment time, other recruitment time – HR, discussions, candidates sourcing costs, etc.). I put the numbers the CEO and CFO agreed were the norm for that company – Every Company is Different.
The Managers spent 10 minutes completing the Direct Costs spreadsheet. They asked several questions to clarify their thinking.
Then we distributed the Indirect Costs spreadsheet that included Lost productivity, poor decisions made by the employee, loss of productivity/billing, Cost of training replacement, loss of management credibility/morale, lower productivity of subordinates, etc. .
Since these costs were more subjective, the managers spent 20 minutes discussing the costs. There was some lively conversation at several tables. I could tell there was a recent employee they were discussing.
When I brought their attention back to me, I asked each table what they found. The tables with newer managers felt the costs would total approximately $425,000 for a person earning $40,000/year for 2 years before they left.
The tables with the more seasoned managers felt the costs would total approximately $700,000.
The CFO from the Executive table stood and said they felt the costs would total over $1,000,000 for a poor performing employee who was only earning $40,000 per year. The eyes of all of the Managers showed shock!
At the end of my training, I asked the CFO why they felt the cost was so high. They had a Customer Support employee who copped an attitude with a client – and cost them a contract.
Every employee is important to your company. They create profitability – or they may cost your company far more than the $40,000 salary you are paying them.
How Do We Prevent This From Happening To US?
Typically, the poor performers slip through the cracks of your Talent Attraction Process. If your company is serious about profitability, I suggest you peruse several of my recent Talent Attraction blogs, titled “Just Saying”.
The foundation of the Talent Attraction process is the job description – “The Lowly Misunderstood Job Description” https://recruiterguy.com/talentattraction-tuesday-the-lowly-misunderstood-job-description
Manager interview training is so important, I needed to write two blogs:
“Importance Of Hiring Manager Interview Training” https://recruiterguy.com/talentattraction-tuesday-importance-of-hiring-manager-interview-training
“Eight Ways To Structure Interview Questions” https://recruiterguy.com/talentattraction-tuesday-8-ways-to-structure-interview-questions
When a company acquires a new company, the due diligence results are important in the final decision whether to acquire the company – or throw this one back in. The final due diligence in Talent Attraction is the Reference Check. Four times since 1985, references burst out laughing when I told them who used their name. If your company does not perform effective reference checks (more than verifying employment), the company runs the risk of losing millions of dollars as the result of a poor performing hire. Is that shortcut really worth that potential risk? “Reference Checks? So Last Decade!” https://recruiterguy.com/talentattraction-tuesday-reference-checks-so-last-decade
The RecruiterGuy.com Talent Attraction business model is my differentiator. I focus on one client at a time and charge a flat monthly fee. This model enables me to attract new talent to your organization while identifying and suggesting improvements to your company’s Talent Attraction process, including Manager Interview Training. https://recruiterguy.com/
Learn how I coach my Career Transition Clients in my most recent book – Employee 5.0: Secrets Of A Successful Job Search In The New World Order http://amzn.to/2D9w39f My book includes an appendix with sample interview questions.
I help organizations Recruit, Onboard, Actuate, and Retain Top Talent.
See you on Tuesdays!
Bill Humbert is available for Speaking, Talent Attraction Consulting, and Training contracts.
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USA 01-435-714-4425 Bill@RecruiterGuy.com
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