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Dear Workforce How Do We Quantify the Impact of Faulty Hiring

We’re trying to polish our recruiting efforts after some bad hires. How can we measure the impact, both in dollars and other costs, of poor hiring decisions?
November 10, 2006
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Related Topics: Candidate Sourcing, Workforce Planning, Dear Workforce
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Dear Penny-pinching:
Employee turnover is an important tool to use in measuring a company's success. But let's be honest: There are different costs associated with "good turnover," in which underachievers are separated, and "bad turnover," in which quality performers leave for other opportunities. Therefore the data alone does not tell a whole story. Radical as it may seem, some turnover can be good--even desirable, in some instances.
 
But let's start with the basics. There are certain quantifiable costs involved in filling a vacancy, whether it's caused by good or bad turnover. These costs are composed of employment advertising fees (print or online), recruiter fees (contingency or executive search,) assessment tools and background checks, travel and relocation costs, HR staff time, and new employee orientation and training. Additionally, turnover will have a qualitative impact on productivity, with work being reassigned and new hires needing time to learn their new jobs.
 
Now let's take the analysis one step further and distinguish the differences between good and bad turnover. When a valued employee leaves, not only do you incur obvious costs, but the company also loses that employee's internal corporate knowledge and experience, external client contacts and sources–and it faces the possibility that the employee will use his or her skills to work for a competitor. Alternatively, when a marginal employee leaves, a company has the opportunity either to incur a savings by not filling the job or to recruit an employee that adds more value than the one who has left.
 
The obvious question from human resources' perspective is how to avoid bad turnover, rather than how to avoid turnover in general. In order to fight bad turnover, every manager in your company should be trained in employee relations, conflict resolution and the implementation of equitable corporate policies and procedures. An employee-retention program that is geared toward maintaining a positive corporate culture and employee well-being always attracts job applicants. However, discouraging bad turnover requires properly trained managers working with human resource strategists to recognize telltale signs of frustration among employees, especially in areas within their direct control. In the end, it is frontline supervisors who are accountable for employee satisfaction within individual departments. Success means giving those managers the proper tools.
 
SOURCE: Alice Winkler, E-Consortia , New York City, December 23, 2005.
 
LEARN MORE: Please read The Turnover Myth.
 
The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.
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 The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.

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