Well, we’re on shaky ground as it is. The political atmosphere is playing havoc with the country’s economy. Next year may just be another year or, as some very clever people predict, one of the more economically uncertain in our young democracy. In light of that, hiring and firing in 2017 is something which should really be weighed more carefully – you might be losing more than you think.
The days of blind hiring are long gone. It simply isn’t accepted practice anymore to hire the first and best person to hand you a CV that looks okay-ish. You don’t have the luxury of “giving it a couple of months – we’ll see what happens”. No you don’t.
Many business owners overlook the fact that hiring or losing an employee isn’t simply a matter of adjusting the payroll. The costs involved in either scenario far exceed the monthly salary of the (ex) employee in question.
Some studies suggest that it can take the equivalent of six to nine months’ salary to find and train the right person for a specific position. Other research shows that the cost of losing an employee is anywhere from roughly 15% of their salary for hourly employees to just over 200% of their annual salary for highly skilled permanent employees.
Why so high? Here’s a quick list of the various costs involved in replacing an employee:
- Advertising or recruiting. The cost for advertising vacant positions is pretty high from the outset, and there’s always a chance that an ad will have to run for a couple of months before a suitable candidate can be found. Recruiting, on the other hand, can deliver faster results, but may come at a cost of 20%-30% of the recruit’s first year salary.
- Training. Whether training occurs in-house or whether it’s delivered by a 3rd party, it still comes with a pretty stiff bill.
- Productivity. It can take up to two years for a new employee to be as productive as a seasoned colleague.
But those are just the obvious costs. There are other factors which may only become apparent over time – factors which may carry a far greater price tag.
- Lowered morale. Friends seeing friends leave can lower both engagement and morale in the workplace. It should also be kept in mind that when employees decide to leave for a better employment opportunity, a double-digit pay raise is usually on the cards. This, compared to the single-digit raise existing employees can expect, may result in an increased outflow of seasoned staff members.
- Historical knowledge. You’ll also be losing more than a monetary equivalent: skilled employees that leave take all their accumulated wisdom with them – historical knowledge gained through experience over the years.
So the bottom line is that hiring a new employee and losing an existing employee both come with cost to the company.
All this boils down to one inevitable truth: a solid employee retention strategy should be in place. A decent salary and long-term benefits aside, some argue that mentorship is the way forward to lowering employee turnover rates.
Whatever your employee retention philosophy may be, in almost all cases it starts with getting the basics right first. These include:
- Checking whether all the necessary qualifications are in place is a start. A deadweight in the office seldom bodes well for team morale and, subsequently, performance and productivity.
- Determining real experience is a must as well. This is slightly harder than verifying qualifications; unless there’s a way to test your candidates, you have to rely on subjective and sometimes biased testimony. Pre-employment polygraph testing can solve this problem.
- Personality and performance metrics are often overlooked during the hiring process. But they are crucial in answering questions like:
- Is this individual a leader or a follower?
- What is their optimal growth path within the company?
- How should he or she be stimulated for their own benefit and that of the company?
- Will he or she fit in well with the team?
- What are the long-term performance and growth indications of this individual?
These are all questions which can be measured and answered before the hiring decision is made. The results can be used to meticulously and strategically forge teams capable of working together in productive harmony, to pair mentors and trainees together with the aim of creating value for the employee and the business. And isn’t value what we all really want from our jobs?