Employees are an investment. Would it surprise you to know that the cost of turnover for a $40,000 a year position, when factoring in hard and soft costs, could cost you as much as $40,000 – $60,000? Employees in their first year of employment are the most expensive to turnover, because making a hiring decision costs time and money
Many turnover costs calculators available for use will ask you to factor in expenses such as cost of time interview, cost of overtime or temporary help, even the cost of a drop in morale if the departing employee was influential or well liked.
Let’s look at a simple example of an employee who only worked for 30 days at a small manufacturing firm; hired as a Floor Manager at $60,000 per year.
| Multiple Interviews (rate of pay for those involved x time) | $600 |
| Cost of Company Vehicle | $700 |
| 1 Week Offsite Training | $1,400 |
| Laptop | $800 |
| 1 Month of Salary | $5,000 |
| Total | $8,500 |
In the above scenario, the employee just didn’t show up on day 31. No call, no notice. So do you have the option to withhold pay to recover some of this money? NO! In researching this situation further, it became clear that some good hiring practices could have saved this organization the time, aggravation and cost of turnover. Don’t let this happen to you!
Step #1 – Understand the Position
If you are tasked with filling an open position, obtain permission to hire, determine your salary budget and establish a time line. The best way to understand the position, and determine the Skills, Qualification and Abilities (S,Q, A’s) necessary is through a job description. If you don’t have one, draft one. If you need help with content, ask someone who has done the job in the past, and ask the person who supervises the position. When outlining S, Q’s and A’s, gather information specific to the essential duties of the job such as computer skills, education level, need for heavy lifting, driving requirements, etc.
Step #2 – Interviewing
You’ll start with application and resume review. Aside from making sure that the applicant’s skill set matches the position requirements, here are some key areas to focus on: Bad Grammar and Misspells; Gaps in Employment (obtain an explanation); Relevant Experience (A good resume will quantify successes!). Once you have narrowed down your candidate cool, use phone screens to gather information on some very basic areas to determine if it is worth while to bring them into the office for an interview. Prepare ahead of time and make sure you don’t ask anything discriminatory, such as marital status, race, national origin, religion age or disability.
Effective in person interviews start with preparing open ended, behavior based questions; typically formulated based off the content of the job description. For instance, when hiring a Customer Service Manager, you may want to ask “Provide in detail an example of a situation where you were called on to resolve the complaints of an angry customer.” The interviewer should be doing no more than 30% of the talking, particularly during a first interview. Put your best listening ears on and tune in for red flags.
Step #3 – Selection
How do you make the right hiring decision? Many times one candidate shines far above the others and the decision is easy. Sometimes you may have to choose between two. In that case, do second or even third interviews to gather more information. Before you make that official offer of employment be as thorough as possible, starting with Reference Checks and Background Checks if necessary. Reference checks can often be done in house and be as simple as asking the applicant to sign a release of liability that can be sent to the former employer, so more detailed information can be divulged. Background Checks are typically outsourced to a third party and can often be worth the cost.
Once a decision is reached, make your offer of employment both verbal and written. Verbal sends the message that you are excited for the new hire to start, and opens dialogue in terms of benefit questions, salary negotiations and scheduling. Formal written offers of employment send a very professional message, begin the expectation setting process and should outline position status, compensation, benefits salary terms, and any information related to first day of work and paperwork requirements.
Finally, remember the importance of a good orientation, training, and new hire onboarding. You only get one chance to make a good impression. Let the first day of work lay the groundwork for a successful employment relationship!
