Some interesting statistics about recruitment and training: A top-quartile performer produces at least 40% more profit than an average performer across all jobs and sectors. The cost per month of finding someone to replace a leaver is about 40% of their monthly salary.
Up to 30% of the annual recruitment costs in most businesses are wasted because they fail to get recruits up the learning curve fast enough. Either people leave or they never really deliver.
The difference between someone whose first six months are managed well and someone who is left to fend for themselves is about 60% more profit from that person. The fully loaded cost of each recruitment is about once the annual salary and benefits cost of the individual.
So if you recruit an average performer slowly and then leave them to their own devices, the annual profit impact can be up to three times the employment costs of that person. Even if you recruit very well, the process will still cost you one times the employment costs of the person.
Most companies, even the most successful, could make major improvements in all these areas. Our experience is they only do so when they really understand the full cost and then take a structured approach to change things.
So how can you do it better?
And what do you do once you start landing your “fish”?
First, get real.
The biggest cause of failed recruitments is a mismatch of expectations. Conning people into a job, hoping they will ignore the later U-turns, never works. Before you sign on the dotted line, check there are no misunderstandings about the job, the objectives, the people or the package. It helps if a third party is involved at this stage.
Seek help designing the terms and the best package for the person that can be the cheapest for the company to provide.
Learning the ropes
Finally, get your recruit up the learning curve fast. Normally it's a concave line, deepened by the “induction crises”. Slow learning about “how things are really done around here” adds to the problems. Playing to strengths – focusing on what they already do well – creates a convex trajectory that adds profits and recovers recruitment costs faster than any training course or welfare chat.
The problems are complex ones. Often they are woven from straightforward issues. The solutions involve common sense.
A well structured approach – one supported by good information about costs and benefits – provides the way forward, and offers more possibilities of addressing successfully the real performance and productivity issue we face in our businesses than most of the current guru books and articles about winning the war for talent.
The financial costs of recruitment
Everyone involved in employing staff understands the importance of finding, hiring and keeping talented people, but what about the financial costs and benefits involved? Studies in recent years have identified some interesting trends and rules of thumb.
How much more do good performers deliver compared to the average?
Studies of performance differences in jobs find it varies according to the type of job. In relatively straightforward jobs, such as cleaners or machine operators, good workers produce about 20% more than their average colleagues. With more complex, professional jobs, the difference is more like 50%. In sales jobs, it is often more than twice as much.
What is the full cost of employing someone?
Normally two to four times the basic salary. One of the high (but often hidden) costs is office accommodation, particularly in city centre locations.
How much does labour turnover cost?
All of the above added together. As a rule of thumb, the cost of replacing someone is usually equivalent to their annual full cost of employment.
When are people most likely to leave?
The most vulnerable time is at the “induction crisis”, three to six months in, and during the first year. After about two years, people are often looking for a promotion or at least a change. Boredom can set in after five years in a job and, at this stage, the organisation needs to start demonstrating long-term commitment.
How do you find good people?
Each of these methods has its merits and its place: Referrals from good current employees often have the best “hit rate” of three to one – one good, suitably qualified candidate for every three suggested. Good advertising can deliver about 12 to one and is often a very effective approach. For some jobs, such as airline cabin crew, unsolicited applications provide a steady source of good applicants.