Cost of Hiring New Employees

It is not often that I hear my business coaching clients use “hiring new employees” and “strategy” in the same sentence. In fact, before hiring me and beyond the typical tactical issues with employees, it was rare for human resources issues to be considered during strategic planning meetings. I recently met with one of my clients regarding challenges they encountered in recruiting sales personnel, and it became obvious that their tactical issues were really related to their strategic model for hiring employees. Worse even than their tactical issues was the fact that it was costing them a huge amount of money to hire new staff members.

Commonly Overlooked Costs Associated With Hiring New Employees

Before discussing the strategic issues of my Florida coaching client and how we wrestled them to the table, I want to clarify what I mean by the “cost of hiring new employees”. Here are some costs you probably do not measure, and they are the big ones:

1. Hiring Success Rate

The lower your hiring success, the more people you have to hire to get a full set of performers. For example, if you need to add 10 people, but your hiring success rate is only 25%, you will ultimately have hired 31 people before you have the 10 people that will perform at your required performance levels.

2. Hiring & Performance Standards

Most companies are lowering their performance standards rather than raising their hiring standards. They get frustrated by their inability to recruit the right people and take whatever they find available. The lower performance requirements result in excess employees, lower customer service, more mistakes, lost opportunities, and lost customers.

3. Leadership Time

Leadership has to divert significant time to interview extra people, manage superfluous people, and address the performance-related issues of substandard employees. This brings far less value to the company than the leadership activities they would perform otherwise.
Unfortunately, there is no separate income statement line item for the above. In every company I have visited, the financial statement impact is huge when we start trying to quantify the above numbers. This is what I am referring to when I am concerned about the cost of hiring new employees:

How Business Strategy Impacts the Hiring Process

As I was working with one of my customers in Miami, they were explaining to me that 2,000 candidates had applied for 10 open sales positions over a 6-month period. They ended up being very disappointed with their results. Very few candidates were qualified. They had tried hiring a few new employees, several of whom never showed up for the first day, and, of the ones that did show up, they were not pleased.
They were looking at all the time that was passing and how much money the employee hiring process was costing them. They were losing money on sales that were not generated by having an open position, sales that were not generated by people that could not perform, and the cost of management time applied for recruiting. After reviewing their situation, we realized the situation was a strategy issue.

Considering All Factors in the Employee Recruitment Process

When developing a strategy, you need to consider the people decisions related to that strategy. In every company, there are several key positions that must be filled quickly in order to grow your business. In my client’s case the need was for additional salespeople. If your business model requires a unique individual (in other words, someone with a skill that is very unusual, hard to find, hard to attract, etc.) and you will need a lot of them to grow to the levels you want, you have a bad strategy. The solution to this is to change the model so that you will be able to staff your model.
My coaching client and I looked at the cost of hiring problem and realized that he was not considering all the factors in the recruitment process and addressing them wisely. In their case, they wanted people to work on a commission-only basis, be highly experienced in my client’s industry, and be a seasoned salesperson. It should not have been a big surprise that none of their ideal candidates were biting. The people that were biting required different internal support systems, and the company was not set up to help them be successful.

Understanding the Costs of Hiring the Employees You NEED

So here is how we attacked the problem. We broke down candidates into 3 groups: No Experience, Sales Experience/No Industry Experience, and Sales Experience with Significant Industry Experience. We then discussed the implications of risk, internal system support, ramp-up time required, compensation systems needed, and search strategy. What we learned from the process was that they had 4 different sales positions, two of which could not be successful without significant industry experience. Compensation needed to be very different for these people versus the others. We concluded that the client’s current internal systems and processes to support the strategy they had chosen were severely inadequate.
These revelations were critical. Failure to identify and address them would certainly have resulted in continued frustration. By addressing the disconnect between how they were approaching people decisions, their operations, and their strategy, my client was in a much better position for success. This was a clear case where the cost of hiring new employees was much greater than they realized.

Improve Your Hiring Strategy

Howard Shore is an executive coach and founder of Activate Group Inc. based in Miami, Florida. His firm works with companies to deliver business coaching to improve executive leadership development. To learn more about executive leadership coaching through AGI, please contact Howard at 305.722.7213.

Seven Techniques to Winning The War on Talent

I am impressed by the number of companies that are experiencing revenue records. And, surprised that in a large majority of cases, business should have been much stronger. Almost all of our clients have had to walk away from business or defer revenue. The primary reason has been related to people. While supply chain challenges have been a significant factor for some, two-thirds of the issue revolves around people. The number one challenge has been having had the wrong people or finding enough of the right people.

While many leaders have pity parties, others have taken a different approach. The truth is that your people’s issues are internally rather than externally driven. Yes, there are more job openings than people actively looking. Yes, many of the people who are applying are less than ideal. However, when was the last time you did not have this same problem! While many companies struggle to fill a few positions, others add hundreds of employees per month.

One client I work with had about 60 Employees in December and is now approaching 200 employees seven months later. They are on track to hire over 50 employees this quarter. They accomplished this while many other companies in their same industry are experiencing difficulty recruiting far fewer employees. There is a clear difference in how my client has approached winning the war on talent. They chose to follow the steps of other companies that were having success and not falling into the trap of listening to others that were not.

If hiring the right people is negatively affecting your business, I recommend you keep reading…

Before I get deep into how, I want to clarify that you probably need to raise rather than lower your standards. I am finding that a primary reason for your company is that you have been building a team with misfits, half-fits, people that lack hunger, and others that may be productive and a nightmare for everyone else to work with. This significantly deters the right people from applying or accepting your offers. Remember the saying, “birds of a feather flock together.” Be careful not to build the wrong flock.

When you accept lower standards, you create significant issues. And while you may try to persuade me that it is better to hire poor talent than none at all, I will respectfully disagree. Hiring success requires that you hire someone who consistently demonstrates all your core values and produces reasonably high productivity standards over one year. Those standards typically rise over the year. Anything less is a miss-hire. When you miss-hire, here are examples of the cost:

    • Let’s assume that lower hiring standards cause hiring success to be 25% (the national average). To correctly fill ten positions, it will take 31 hires before you have to fill them with the right people. Consider how much extra burden (recruiting, productivity, management time, training, and so on) it places on your organization.
    • Wrong people suck the life out of your best people. They infect the right people.
    • Wrong people cause lost business.
    • Wrong people damage your company’s reputation.
    • Wrong people cause right people to quit or not join your company.

I am sure you are reading this and thinking, “theoretically, you can’t disagree, but what do you do when you need people, and the right ones are not presenting themselves. I have identified seven techniques companies are using right now to win the war on talent.

Allocate Proper Resources

If I looked at how much organizational time and resources go into finding more of the right people, I will bet that you would receive a failing grade. You should be willing to work as hard (if not harder) to find people as you do to get customers, service customers, and create products and services. With the right people, it becomes easier to get and keep a customer. Product quality and service levels go up. To be a top-performing company, you must build a talent acquisition model that is the standard for your industry.

In every case where a company has a recruiting problem, I find a resource problem. For every eight people to be hired in a month, you need at least one full-time professional recruiter. Recruiting is not placing advertising on job sites. That is marketing, not recruiting. Recruiting is reaching to and communicating with candidates. Recruiting is a specialty role that requires the right type of person, knowledge, and skills. Just because someone works in Human Resources (HR) and has a professional designation does not make them a recruiter. Many HR people hate recruiting, suck at recruiting, and want to be doing something else. If you need a recruiter, hire a recruiter. Another common issue is delegating recruiting to administrative staff. This is the equivalent of putting a rookie in a position that requires a veteran. This is a war and you need the right weapons and strategies to win it.

The client I mentioned above has six full-time recruiters who all make six figures. What do your recruiters make? My client’s minimum standard for recruiter productivity is 100 applicants per filled position and two people hired per week. Essentially 1 in 100 candidates is employed by my client. They make every candidate complete three assessments, undergo several rigorous interviews, and have some of the highest standards of all companies I have ever worked with.

Engage Everyone

Every person in your company should be engaged in recruiting! When you are proud of your company, why wouldn’t you? Asking people for referrals and engaging them in a process is different. Engaged means it is important to them. Ask an overworked person how you can help, and they will tell you to hire more people. Yet, they know and interact with lots of people all the time. “And birds of a feather flock together.” They need to be part of the solution. If you want more people like you have, teach them how to help fill the company with great people.

Do you have a process to engage employees? Have you provided them with the knowledge, tools, and resources to help bring in candidates? Do you have a financial incentive that is worth their time? Does everyone know what positions you are trying to fill? Do they know what to look for? Have you made the process easy for them to help? If not, you are missing huge opportunities. The right approach leads to better candidates, more candidates, and often your best employees. If you are not receiving a significant number of candidate referrals from employees, they either hate working there, or you have a bad process.

Segment the Market

Similar to identifying customer segments, you need to identify employee recruitment segments. Everyone is not an ideal candidate for your position. One of our clients hires a lot of salespeople. They figured out that many of their best employees came from the car industry. These employees were well trained, well-screened, and could make far more than if they sold cars. As a result, most of their recruitment efforts target people who work for or worked for car dealerships.

Another client needs people in construction-related work and realizes that they have high success with former military people. So all of their efforts for certain positions are focused on getting access to people that are in the process of transition from military to civilian life.

Reduce No Shows

A problem that has always existed is people who applied for positions and never showed up for their interviews. With government stimulus packages to help unemployed workers, it seems to have exasperated this issue. Whether or not that is true, you need a process that discourages these people from wasting your time. We have found that requiring applicants to complete assessments before they are considered for positions weeds out the not serious people. That, combined with a quick phone screen, can help you minimize the effects of no-shows.

Increase Process Speed

Another common I see, which often is the consequence of the resource issue I mentioned above. Does it take too long to complete your hiring process? How long from when someone submits a resume to when they can get to “yes” or “no.” If it takes more than four weeks to complete your cycle from resume to offer made, you are going to lose great candidates. The lower the level, the faster your process should be. If it is a front-line position, set your goal to a two-week cycle time. They have lots of options, this is where the biggest shortages are, and the early bird gets the worm. The longer it takes to complete the process, the less interested someone will be to work for you. Customers require speed and employees are your most important customer.

Raise Pay

For any of you that have read my book, Your Business is a Leaky Bucket, you will not be surprised to find this suggestion. There are many case studies where companies paid far higher compensation than their competition and had higher net profit statistics. This happens when you are more proficient in hiring the right people. Great people do three times the work of the average worker. Finding the best people and compensating them leads to more ideal candidates and higher retention. Don’t look at compensation, monitor return on the payroll. The later is where the secret to success lies.

Leverage Virtualization

If you are one of those people that believe that people have to work in your office to be productive, you are missing a great opportunity. While I know you likely have positions that require people to be in your office, there are many situations where that is not true. By being willing to allow people to work anywhere, you increase your pool of potential candidates. When we were hiring an executive assistant, we picked markets where we thought more high-quality candidates would be. This not only increased our candidate pool, but we also found that we were getting far better candidates in other markets. In the end, we hit a home run with the person we hired. Virtualization is here to stay and can be a key weapon in the war on talent.

Conclusion

If you can’t fill positions fast enough, have too many underperformers, it is an internal problem, not external. Put the best talent at your biggest problem. And engage all employees to be part of the solution.

Howard Shore is a business growth expert who works with companies that want to maximize their growth potential by improving strategy, enhancing their knowledge, and improving motivation. To learn more about him or the other activate group business coaches please call (305) 722-7213.

Team-Building

STOP…wasting money on team-building exercises and retreats that, in the end, fail to bring about the desired results anyway. A significant reason that team-building initiatives fail is that too much emphasis is placed on the misconception that team-building should be fun. The purpose of team-building is to improve the performance of a work group, thereby creating better outcomes. This requires change, and for most people change is not fun … it is hard work. Team-building can be fun… if the members of the work group enjoy the learning process and relish the opportunities that change will bring. This is where a business coach plays a vital part in successful team building that brings results.

Key Elements For Driving Team Performance

If you want to improve teamwork and performance in your organization you have to look at the four core elements to driving team performance: relationships, goals, roles, and rules. All four of these elements must be executed well for the organization to flourish.

Focus on Improving Relationships LAST

Ironically, improving relationships is probably the last area you should focus on. Yes, the area that most leaders spend most of their time addressing is usually the symptom, not the problem. Almost every organization that has team-building issues will find their root of their problems in goals, roles, and rules. In my experience, when we address goals, roles, and/or rules, many of the relationship problems disappear.

State Your Goals

The first step toward achieving success as a team is to state your goals properly. You know your goal is well stated when anyone who reads it knows exactly what you are trying to accomplish and in what time frame. The better a person states the goal, the easier it is to create the action plan. An acronym commonly used for stating a goal properly is SMART (Specific, Measurable, Attainable, Realistically High, and Time-based).

Understanding Your Roles

In order for a team to function properly it is important that every member of the team understands specifically the actions and/or activities assigned to them. This is not as simple as some make it out to be, which is why this is usually an issue for team. There are two different types of roles: task and maintenance. The “task” roles relate to driving the desired outcome of a team. The “maintenance” roles relate to managing team processes and relationships among people on the team.

Rules Must Apply to Everyone

Rules are a very important component of teamwork. This is one of those areas many leaders, particularly in entrepreneurial and family-owned businesses have the biggest concern with. Everyone is fine with rules as long as they apply to others. You cannot have one set of rules for some people and another set for others.

Contact us if you need team-building ideas.

Howard Shore is a business growth expert and business coach who works with companies that want to maximize their growth potential by improving strategy, enhancing their knowledge, and improving motivation. To learn more about him or his firm please contact Howard Shore at 305-722-7213 or shoreh@activategroupinc.com.

How Strong Is Your Leadership and Management Team?

When evaluating your company’s ability to grow and to really scale itself, there is one question you must first ask yourself. How strong is your leadership and management team? Depending on your size, you may only have one level of management. As you grow, there will be multiple management levels to monitor. No matter the number of levels in place at this moment, your ability to grow will be dependent on leadership and management strength. Would your competition be jealous of your leadership and management team?

Leadership From the Bottom to the Top

“A fish stinks from head to tail.” Too often I hear the management team complaining that their company would be so much better if they had better people. If this problem is occurring in your company, start scrutinizing leadership. If you have the wrong team, you likely have problems at the top. The problem at the bottom will not be fixed until you fix the problem at the top.

EVALUATING MANAGEMENT

Do you have the right people in the right seats? “The right people” refers to company culture. Does each of your leaders and managers exemplify your company’s core values? If not, they are creating the wrong standard of behavior for the rest of the team and will infect your business culture.

“The right seats” refers to performance. Does the person you have chosen to perform in a leadership or management position produce the outcomes required of that position? In many cases, leadership is not held to the performance standards required of lower-level employees. If I were to ask you which top 2 to 3 key performance indicators are used for each leader on your team as standards for good and bad performance, would I get the same answer from you and each subordinate? If not, how do you know you have the right people in the right seats? How do you know whether any part of your organization is suffering because its leader is underperforming?

Are They A Strong Team?

Here is where things are usually the most difficult. Do you find it hard to get people with different personalities, experiences, beliefs, and functional skills sets to work together? Do you find imbalance in how much of the leadership weight is being carried by various leaders? Do you find it strange that people who are supposed to be working together work at cross-purposes? It is frustrating how seemingly smart people can spend so much time putting out fires rather than addressing the issues that would prevent the fires in the first place. When I have met strong leaders this is what I find:

Characteristics of Strong Leaders and Managers:

  • People that never stop learning.
  • Smart and talented people who have humility.
  • Answer-seekers that ask a lot of questions.
  • Knowledge and experience combined to co-create.
  • Balance in contribution from team members in meetings.
  • All team members seek each other’s opinions on various issues.
  • Healthy conflict and debate on key issues.
  • Alignment on the priorities.
  • Decisions made and commitment from all team members.
  • Team members hold each other accountable.
  • They get the most important priorities done and consistently achieve their goals.

How to Improve the Leadership and Management Team

Understanding the necessary qualifications of a strong leader and building a strong management team takes experience and dedication to the employee. Sometimes an executive coach is needed to help increase the effectiveness of leadership and improve management skills. To learn more about how an executive coach can help your leadership and management team, call Howard Shore – one of the top executive coaches in the United States – for a FREE consultation at 305.722.7213 or contact Activate Group Inc. today!

Hiring the Right Employees

Hiring the right employees for your business can be a challenge. Most of my clients in Miami and Fort Lauderdale were adamant that they have excellent recruiting processes. The people they hired went through rigorous interviews, had great backgrounds, and should be performing at expected levels. However, the key performance indicators were telling a different story.

Underperforming Employees

Dismissing the usual answer — “the employee must have lied during their interview” — we dug deeper and asked these key questions:

  • Are expectations clear?
  • Are expectations realistic?
  • Is management sending mixed messages?
  • Does the person have the tools to do their job well?
  • Is the organization creating any barriers preventing them from doing their job well?

Hiring the Right People for the Wrong Jobs

After asking all the key questions, management realized they were hiring the right employees, but for the wrong jobs. The people they hired were a good fit for their core values and were well-credentialed. They just were not what these companies needed in order to produce the required outcomes for the jobs at hand. We see this all the time!

Management does not spend enough time really understanding the true attributes needed in the person to successfully fill the position. When attempting to hire the right people, there are many considerations in terms of experience, skills, talent, behavioral profile, and values needed to fill the role. In most cases, management fails to think this through before they hire the employee. Sometimes ,they go through the work of identifying what is needed and then fail to be patient in looking for candidates that completely fill those requirements. The result is a wrong hire.

Employee Recruitment Process

If you want to increase your success with hiring the right employees, it is imperative that you answer these questions before beginning your recruiting process. Make sure that everyone involved in the selection process knows the answers to these questions, and measure your hiring decisions against how well the candidates match the criteria. For those of you reading this and saying that you’ll take attitude over credentials any day, I say you better get both.

Key Questions for the Employee Hiring Process:

Ensuring You Hire the Right Employees for the Right Job

  1. What is the title of the position?
  2. What is the brief description of the position? In other words, what would not happen in this company if this position did not exist?
  3. What are the 3 to 5 most important measurable and specific goals/objectives this person will be held accountable to achieve?
  4. Who are the customers/clients that this position serves, and how do those customers/clients measure service?
  5. What key processes does this position own, and how do you measure that the process is working properly?
  6. What other key/critical processes are associated with the position, and how do you measure that the person in this position is doing their part well?
  7. Does the position have any certification and/or licensing requirements?
  8. What is the position responsible for and what is it accountable for?
  9. Who has input in this person’s performance review, determines their compensation/raises, and is responsible to help them develop?
  10. What do you see as the biggest challenges to success in this position and what steps must be taken to address them?
  11. What are the minimum qualifications for the position in terms of education, functional experience, and industry experience?
  12. What specific industry knowledge does this person need to have?
  13. What capabilities must the applicant be proficient in or excel at to be successful?
  14. What would you say are the critical obstacles for those filling the position, and what are the steps that must be taken to address them.
  15. Describe the ideal person for this position in terms of how they address new decisions/challenges, interact with people, deal with pace in the environment, and approach rules and procedures?
  16. How many subordinates does the position have? Describe the relationship this position has with it subordinates (e.g. can they hire and fire people?)

Results of Creating Proper Job Positions

Our clients have found their hiring success has improved dramatically once they have made a proper commitment to job design and position profiling. Only after you answer these questions should you begin your recruiting processes. The answers to these questions will help you have a much better mental picture of the ideal person. Without this information it becomes hard to screen out candidates as the ideal person is too vague.

An executive and business coach can provide you with practical business processes and solutions to accelerate your business growth. Call to learn how to improve your growth potential by contacting Activate Group Inc. at 305.722.7213.