Managing Turnover: The Hidden Cost Black Hole

When you hear the words “turnover” and “churn” do your thoughts turn to chilly fall evenings with fresh-baked apple-filled pastries and a big scoop of ice-cream? Or do the words give you a staffing headache?

A lot of small-business owners make the mistake of not interviewing to hire once. They don’t know it, but their hiring practises mean that they have to go through the hiring cycle a couple of times before they find someone that is the right fit for the job, and will stick around.

There are two main problems here:

  1. The wrong person gets hired, and is unproductive. The business owner makes too many concessions for this lack of output, and the company suffers. If you’re a small business, you have to be especially aware of the return on investment you get from your human capital. If you keep the person around and their workrate or quality of work doesn’t improve, the company suffers for a longer time, but if you fire them you have to find a replacement who will be more productive. And that’s hard to know from an interview.
  2. A very qualified and skilled candidate is hired, but the job is not challenging for them, and they quit. This leaves the business owner having to go back through the hiring process, which can be time consuming and costly.

If you Google search for “cost of hiring the wrong person” you’re going to see a lot of ads for staffing services with some good information attached. It can cost money, time, productivity, staff morale, customer goodwill and loyalty, when you hire the wrong person. That’s why getting it right first time is so important.

So how can you get it right?
It’s simple, really, if you pay attention to the skills and behaviors needed to perform the job functions.

Be realistic about the job, and how qualified the person really needs to be to do it. Very often, business owners hire over-qualified candidates. Hiring for where you want to be is a good thing, but you have to get there quickly to keep your employees engaged. Some jobs need the candidate to have specific experience, with or without a degree. Not everyone can be a decision-maker, so hiring people with significant decision-making experiece is only likely to disappoint them. And worse, they might question your ability to lead your company, causing disharmony among your other employees.

Be realistic about how much you’re paying. Assess how much you’re offering as compensation for the position, then look at the skills and experience of your candidate pool and estimate how much a person with that background could reasonably expect to earn. The bigger the discrepancy between the numbers, the shorter that person is likely to stay. There are exceptions, of course, especially around people changing careers or retraining. But by and large, though, people rarely expect to get paid the appropriate rate for the job they do. They expect to get paid the appropriate rate for the jobs they could be doing with their skills and qualifications.

Don’t oversell the job to the candidate. If you know that you’re hiring for a dead-end data-entry position, don’t sell it up as having management potential. Being honest about that will set the right expectation from the start. It will also cause the people most likely to quit to remove themself from the field. When that happens, you’re left with the people who either a) really need a job, any job; or b) really want to work for your company. In both cases, they’re much more likely to stick around.

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