What You Don’t Know About Hiring Costs Can Hurt You!

For many companies, more thought and time goes into replacing a computer printer than hiring “their most important asset”.

Doesn’t it seem odd that a company that regards “people as its most important asset,” doesn’t accurately measure the cost of acquiring that asset. That is exactly what happened when The Human Capital Metrics Consortium attempted to collect data for its annual survey. Chances are the same management teams that know the company’s actual and projected revenue streams to the penny are 50 percent less likely to know the cost of hiring employees and terminating employment.

The survey just released last month, published by Staffing.org, estimates the cost of hiring one employee at $4,263 in 2003.

The cost of hiring an employee has enormous impact on both productivity and profitability and costs over four times more than what you might spend on something as basic as a computer printer. Before you purchase a new printer you do a bit of research. Not a lot, but enough to feel comfortable with your decision. You visit the local office supply stores like Staples and OfficeMax. Then you surf the Web for consumer feedback and best buys. You evaluate how many pages you print each month, the cost of the toner or ink, and whether you want color or black and white. Finally, you compare the specifications of several brands and models within those brands until you make your purchase. All this for a purchase that comes in under $1000, maybe even less than $500. Why do companies continue to ignore the importance of human capital metrics?

Studying these cost of hiring statistics offer some insight. Of the approximately 2,000 organizations participating in the study, only half had solid financial data reflecting the true cost of hiring one employee. Yes, that’s right – only half of the HR professionals who supplied the data for the study had quantifiable and valid information that could be used. It is obvious – too many organizations don’t know how much recruitment, staffing and turnover cost their companies. Perhaps they believe what they don’t know won’t hurt them or these hidden costs are just a fact of doing business. That is an erroneous and dangerous assumption.

While we are discussing numbers, let’s test one more assumption. If the cost of hiring an employee is $4,263, then the company loses an equal amount on the balance sheet if that employee doesn’t work out and the hiring cycle starts all over. One hiring mistake now costs $8,526 to replace a single employee. When all is said and done, the cost to hire one employee in a competitive industry can cost nearly 30 percent of the employee’s annual salary. This expense doesn’t even take into consideration the the cost of training, lost opportunities, impact on morale of co-workers, and strain on productivity.

Is there a way to avoid hiring mistakes without making the hiring process completely onerous?

Online personality tests can be the hiring manager’s best management tool. But, like computer printers, there are a lot of choices to sift through.

With thousands of tests available on the Internet, how do you know which are best for you and your business? Here are some tips for bypassing the hype about pre-employment tests and staying on the road leading to sound hiring decisions.

First decide which type of employee evaluation tool you need – one that screens poorly qualified employees from a pool of applicants or a tool that helps you select the right employees from a short list of candidates. By assessing personality or work attitude, screening tools weed out the high-risk applicants right up front. No mess, no fuss. For example, a validated and reliable pre-employment screening test can knock out 20% to 30% of the applicant pool. As an employer, you realize immediate savings in time and effort. FirstView Job Fit screens for personality traits. SELECT screens for work ethic and attitude and Counter-Productive Behavior Index screens solely for work ethic.

Once an applicant passes through screening, it’s now appropriate to use selection tools, those that identify the candidates who are both qualified and motivated. Selection tools – sometimes called personality inventories – help hiring managers cull those candidates that are the “right fit” for the job. The newest generation tool is TotalView. This sophisticated selection tool is easily used by both the hiring manager and job candidate. The TotalView Assessment System, which includes the TotalView assessment, allows a manager to create quickly a job profile that identifies cognitive abilities, motivation and interests critical for a position.

After a candidate completes the personality test, and this can be done on-line, the candidate is matched against the TotalView job profile and the manager receives a job match score. A job match score of at least 80 percent indicates the candidate has the necessary skills and personality traits to do the job. A ranking below 80 percent raises some concerns while a rating of 69 percent or below indicates serious concerns. The TotalView assessment offers even greater value to the manager because each TotalView selection report gives the manager three interview questions for each ability or personality trait where the applicant score dips below 80%.

A very common question asked to us is “can’t a candidate fake the test”. The answer is yes. They can try to fake it but the TotalView Assessment System has four internal validity checks to catch the candidate who thinks they are smarter than the technology.

As a quick review, a screening tool allows hiring managers to make a first cut in a large pool of applicants. The selection tool fine tunes the interview process with a means of making an objective assessment in what can be an inherently subjective process.

Because pricing is relatively low for many screening tools, it is tempting for many managers to use these screening tools to ascertain the job match between the applicant and the job. Screening tests, however, work best for hourly, low to semi-skilled job-level positions. Screening assessment tools are less effective for identifying talent in key positions such as sales and management.

Regardless of the sophistication and reliability of a single assessment, Success Performance Solutions clients have found that one test just doesn’t cover all facets of human personality. Therefore, those of you who want to match the right person to the job the first time should follow this recommendation. Use CriteriaOne, our proprietary selection and employee evaluation process.

CriteriaOne uses three assessment tools – DISC, Personal Interests, Attitudes(tm), and Values and TotalView(tm). By using this “whole person approach” you get an accurate picture of the work style (HOW candidates will do the job), what candidates value (WHY they will do the job),and how quickly candidates can learn, how accurately they work with numbers, words and shapes, what interests them at work, and if they have the personality to do the job, and fit with your team and your business culture.

Whew! That’s a whole lot of information. But, here’s an important comment. Personality inventories are not tests in the literal sense. There are no right and wrong answers, no passing or failing grades. Personality inventories simply help determine whether a candidate is a match for the job, and as a member of your team. While they may not fit in one particular job, they might be a top performer match in another.

This article originally appeared in The Total View, a weekly online newsletter that focuses on hiring, management and retention strategies. The Total View is written and published by Ira S. Wolfe, president of Success Performance Solutions and is distributed with permission by The Chrysalis Corporation. Subscribe for FREE to The Total View by typing your e-mail address in the newsletter sign-up box on the right side of this page.


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