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Grow Your Business By Hiring The Right Talent - 3 Sessions Led by Paula A. Soileau, CPA, Co-Founder, CEO Affintus LLC The overall success of every organization depends on the employees doing the work. In companies of all sizes, talent management is at the top of owners’ and executive’s to-do lists - they see talent as a significant competitive asset, but report their frustration with long hiring processes and unpredictable outcomes. This series shows business owners and managers how to improve their hiring success fast. Most small and mid-sized companies focus time and resources on finding the “right” employees – the people they need to grow the business. But three out of four businesses report making at least one hiring mistake that cost thousands to fix. Hiring the wrong people can dramatically affect the bottom line as well as client relationships and company culture. “Especially in smaller businesses, the impact is more dramatic and mistakes become more critical,” Says Mark Hamilton, CEO of Bell Tea & Coffee Company, a 100-year-old company. The majority of business leaders believe employees can make - or break - the business. Participants in this series learn how to adjust their hiring systems to reduce the time and cost of hiring while identifying the candidates who really will make the best employee. Figuring out how much you spend to hire someone is eye-opening. Most companies do not track this critical expense. In this session you will find a simple method for calculating cost-to-hire and then brainstorm ways to reduce the cost and time-to-hire.
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AffintusThe Value of Talent
…calculate your cost to hire and learn how to reduce
it
October 5, 2012 | Paula A. Soileau, CPA
©2012 Affintus, LLC
Challenges – Finding the right candidate takes too long
Who, what will be successful in a position not easy to determine, and how does manager know which candidates are best
Social media results in lots of candidates Internal processes may be inefficient
Employers settle for “good enough” Difference between “good” and “great” performers can be
significant, but hard to know who will be “great” People have biases
Recruiters, Hiring Managers, Business Owners - we are drawn to what is most familiar, what is most like us which does not always reflect what is best in certain jobs
Often rely on subjective “data” (i.e., resume, LinkedIn profile)
Why does it cost so much?
Factors That Affect Hiring Costs
Turnover rate Number of hires in a year Time to hire / time positions vacant Time to learn job / ramp up The hiring process itself (efficient vs.
inefficient) Average salary
So which ones do you workon to impact business results?
Turnover rate Number of hires in a year Time to learn job / ramp up Time to hire / time positions vacant The hiring process itself (efficient vs.
inefficient) Average salary
Cost To Hire…a simple calculation
a) Number of Employees 2011
b) Estimated hiring in 2011
# of hires or placements
c) Average hiring rate %
= b / a
d) Average Annual Salary $
e) Average cost per placement 25%
% of salary
f) Cost of Placements 2011 $
= (.30 X d) X b
Measuring Cost To HireImpacts Business Results
SAMPLE CALCULATION
a) Number of Employees 2011 100
b) Estimated placements in 2011
# of hires or placements 15
c) Average Turnover Rate 15%
= b / a
d) Average Annual Salary $ 50,000
e) Average cost per placement 25%
% of salary
f) Cost of Placements 2011
$187,500
= (.25 X d) X b
Measuring Turnover Rate Impacts Business Results
Formula Turnover or Retention = (NSFY / AEFY) * 100 (company-wide and for each dept.)
NSFY = Number of separations during the fiscal year AEFY = Average number of employees during the fiscal year
Measuring Time To HireImpacts Business Results
2 Formulas TF = RR – OD Time to acceptanceTS = RR – SD Time to start
TF = Time until offer acceptance TS = Time until new hire starts work RR = Date requisition received OD = Date offer accepted SD = Date new hire starts
Measuring Estimated Cost to InterviewImpacts Business Results
Formula Estimated Cost to Interview = C*($M*Mhr) + ($R*Rhr)+$Trav C = total number of candidates interviewed $M = mean manager salary per hour Mhr = mean number of hours manager spends on interview-related activity
per hire $R = mean recruiter salary per hour Rhr = mean number of hours recruiter spends on interview-related activity
per hire $Trav - Expenses per candidate: travel, meals, etc.Note if multiple employees involved in interviewing, Mhr or Rhr in the formula should be adjusted to reflect
number of total hours for all managers or other employees
Measuring Productive WorkforceImpacts Business Results
Formula PW = HC – (%pNH)
PW = Productive Workforce HC = Head Count %pNH = New Hire Productivity Estimate
Human Capital MetricsImpact Business Results
FACT
OF NEW HIRES FAIL TO MEET TARGETS WITHIN 18 MONTHS48%
FACT MANY RESUMES CONTAINERRONEOUS INFORMATION
FACTFEW NEW HIRES BECOME HIGH PERFORMERS
Hiring is hard…
Cost by firm size
Blatter, Marc et al. 2009. The Costs of Hiring Skilled Workers. Working Paper No. 15. Bern, Switzerland: Institut fur Strategie und Unternehmensökonomik.
Better (and Faster) Hiring in 3 Steps Clarify requirements and needs of the job
Be clear on what the job is and is not (don’t use a moving target or “figure it out later” approach)
A Job Description is useful! Analyze top performers
Apply objective process first, then moresubjective criteria later
Reduce reliance on the resume - self-reported, subjective Understand limitations of resumes and interviews Look for “natural” talents and abilities; skills can be taught
Structure interview Behaviorally-based questions – example of when candidate did X Take notes, rate responses If there are personality “quirks”, don’t think you will change or “fix” the person later –
consider how important or unimportant - be honest
** Bonus – when hiring, help managers plan entire process (schedule upfront) – use key human capital metrics to improve results
Better Hiring ImpactsBusiness Results
10%10%
50%50%
More from Affintus onImpacting Business Results
Oct 12 The Limits of Experience and Education: learn why not reading a resume is the best start to better hiring
Early in their careers, most execs and managers learn that prior work experience and educational background are key factors in job success. But it turns out that neither is related to future success on the job! In this session you will find out what factors you should look for in potential employees.
Oct 19 The Value of Behavioral Interviews: learn how to interview to find out what you really need know as fast as possible
You have probably read a lot about interviewing and how important it is to “get to know” the candidate face-to-face. The problem is that most interviews turn out to be a conversation rather than a fact-gathering activity. In this session, learn how to create questions that really get to the heart of what you need to know to make a hiring decision.
AffintusGreat people data. Great business results.
[email protected] | Paula A. Soileau, CPA | 1-866-429-
4351
©2012 Affintus, LLC
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