Job Fitness Series: The High Cost of Miss-Hires

Job Fitness Series: The High Cost of Miss-Hires

© Pamela Holloway and AboutPeople. March, 2003 1

Avoiding the Wrong Person for the Job

The high cost of miss-hires and what you can do about it

Would you do things differently if you knew that a single hiring mistake would cost

your company hundreds of thousands of dollars? How about if the same losses

applied to the people who didn't leave - the under-performing, disengaged members

of your staff?

The reality is, a mistake does cost you that much. The most conservative estimates of

turnover show costs in the range of 2 to 3 times annual salary. For a professional

making $80,000 a year, that's $160,000 to $240,000. How many $200,000 dollar

mistakes can you afford to make?

Bear in mind that these are average statistics for average employees. What's the cost

of losing an A-level performer? Brad Smart, author of Topgrading - How Leading

Companies win by Hiring, Coaching and Keeping the best People, suggests the

multiplier is more like 27 times annual salary if the mistake involves an "A" player.1

Using Brad's math, your $80,000 miss-hire now costs you 2.1 million!

In case you're thinking you're off the hook because turnover isn't a problem in your

company - think again. Research by the Gallup organization suggests that the costs of

low productivity or "disengagement" as they call it, may be even higher than that

associated with turnover!

Gallup found that 75% of the employees in most companies are not engaged at work.

Not only are disengaged employees not making you any money, they're also costing

you money because they're the ones making all the mistakes!

In Follow This Path,

Gallup authors Curt

Coffman and Gabriel

Gonzalez-Molina note that

"disengaged employees

cost companies hundreds of

millions of dollars a year."

They estimate lost

productivity cost at $3400

per $10,000 of salary. Which means that the $80,000 a year not-so-great professional

that you wish had left, costs you $27,200 a year in lost productivity. And that's only if

he doesn't make any really costly mistakes. And don't forget - that's not a one-time

cost, its an ongoing one.

National trends indicate that only one-third of the

workplace in the US is engaged. Gallup has

calculated that the cost to the US economy of this

disengagement is in the range of 254 to 353 billion

annually. That's 350 BILLION DOLLARS! That's

larger than the US budget for either education or

national defense.2

Job Fitness Series: The High Cost of Miss-Hires

© Pamela Holloway and AboutPeople. March, 2003 2

To make matters worse, I suspect this one professional isn't the only "disengaged" or

under-performing employee you have. Do the math for a mere 10% of your staff and

chances are you're looking at big bucks!

What causes disengagement?

What do the experts say is the primary cause of disengagement? Number one on the

list is poor job fit. More specifically, people in jobs that don't make use of their

natural talents. Job fit, or lack of fit, is also a primary cause of turnover.

Gallup found that employees who are able to utilize their natural talents in their jobs

are more likely to be engaged. And not only are engaged employees significantly

more productive, but they also impact the bottom line in other important ways. They

don't make costly mistakes. They recognize and capitalize on opportunities. They

create "engaged customers" which experts claim is the key factor driving sustainable

growth, in all organizations, across all industries. 2

Yikes! What can you do?

Suffice it to say, the costs of making a mistake, whether it's hiring the wrong person

or continuing to ignore under-performers, is significant. In the interests of your

bottom line, you'll want to pay close attention to who you hire, carefully examining

whether they "fit" the job and the organization.

The good news is "job fit" is something you can do something about. It is a much less

imposing task than attempting to make wholesale culture change. And even small

changes in hiring practices and selection for jobs internally can produce lasting

benefits.

Even more good news. There are some wonderful tools and resources available today

to help you get your arms around this critical issue. You can go as high-tech or as