How much is employee turnover costing your company?Where are all the good applicants?Why is it taking so long to fill these empty positions?
Recently, these and other questions relating to the employee selection process have become top priorities on every employer's agenda. Many companies are looking to their employee selection processes to reduce turnover and increase output through a higher-quality workforce. However, employment statistics reveal a shrinking pool of skilled applicants.
Current literature indicates that employee turnover and poor performance have a significant and costly impact on a company's bottom line.
Consider two factors when calculating your cost of hiring and poor performance.
First, direct costs for a given position typically include items such as placement firms and advertising. Second, indirect or hidden costs affect not only a given position but also the company as a whole. Indirect costs may include lost productivity, downtime, bad publicity, loss of sales, low company morale, loss of customer trust, and any other ripple effect caused by poor performance or turnover.
Before beginning a cost-reduction initiative, focus on a single position or job category and determine the direct and indirect costs associated with it. Second, add these costs to create a Total Cost Per Hire (TCPH). Third, determine the number of W2s for One Year (W2OY). Finally, multiply the TCPH by W2OY to calculate the Total Selection Cost (TSC). By reducing the W2s (turnover) for one year, you will be able to decrease the TSC.
Today employers must discover new recruiting grounds for employees. For example, Internet use reduces selection time by 66%, according to Kennedy Information LLC, a management consulting and executive recruiting firm.