People are not born with innate human resource skills. Even worse, the human resource function is often held in bureaucratic disdain. However, if you have ever had the pleasure to work with a real pro, it is quite clear that a good human resource process function “operationalizes” execution.
Entrepreneurial companies stand to gain a windfall from developing good HR processes—especially rapidly growing ones. In reality, unless someone from the leadership team came from a larger company with good institutionalized processes, they may not be aware of what they are missing.
Let’s focus in hiring for the moment—beginning with the correct turnover measure. Most companies use the number of total employees in the denominator for determining turnover. Wrong approach!!! This method dilutes the result.
The better measure is to compare the number of turned over positions for a period against the total number of positions hired for the same period. This is especially appropriate for rating the hiring process of a particular segment of a business model undergoing transformation.
By using the recommended measure, it was possible to communicate to a particular leadership team that they had sustained 100% turnover for all sales people hired in 2004. Instead of realizing the desired increase in top line growth, all that was accomplished was increased operating overhead. The correct measure called attention to an inadequate hiring process.
The solution isn’t that difficult. Interviewing skills may be dramatically improved by using a good process that is supported by tools—beginning with knowing what characteristics are desirable in a new hire. This is critical because the hiring manager is compelled to reconcile their own personal biases against what the position should be in order to align with corporate strategy.
There are numerous studies available on the web that substantiate the cost of turnover at about 150% of the fully loaded cost of the position—irrespective of the amount of time the person is on the job. The amount goes higher as the position becomes more senior.
How could this be possible? Let’s start with the benefits cost of the position—typically north of 20%--and the employer side of FICA and unemployment tax at the federal and state levels. Was a recruiter used? What about the opportunity cost of the people pulled off the line to interview—and the opportunity cost of the targeted position being vacant. It quickly adds up, especially for senior level executives.
Getting it right the first time is a reasonable expectation when trained people use the same process and tools for a consistent outcome.