Staffing Waste: Identify it, measure it, improve it (Part 1 of 7)

July 10, 2010

Modern Hire

Recently I had a candid conversation with the president of a building materials company about ways to improve the results of hiring new sales representatives. When I asked him about the cost of onboarding a new hire, he said confidently, “The length of the sales cycle and the learning curve takes a new rep about two years to get up to speed. So I budget about $250,000 for each new hire.”

“Unfortunately,” he added, “they all don’t work out. We make about 50 replacement hires per year.”

“Where else do you budget for waste in units of $250,000?” I asked. After racking his brain for a brief and what appeared to be a painful moment, he replied that all of the manufacturing at his company doesn’t waste that much in an entire year.

“However, I am getting better at firing new hires in the first year now,” he said with a bit of a chuckle, attempting to lighten the weight of his $12.5-million realization.

I’ve included the above story to illustrate the critical yet often overlooked concept of staffing waste. One form of staffing waste is the investment of recruiting and onboarding new employees who quit or are terminated before they achieve proficiency or minimum performance standards. And, while the cost of acquiring front-line performers at your company may be far less than, say $250,000, early turnover at any organization can cause significant losses.

The purpose of this article is to help HR professionals and others in your organization see staffing as a process with return and understand the scope and impact of staffing waste. I will identify and explore four specific methods that you can use to document staffing waste. And once I’ve armed you with several action steps to collect and explore this data, I’m confident you’ll be compelled to seek additional methods to improve your employee selection process to enhance your employment assessment test.

The hard truth is that you’ve hired your best and you’ve hired your worst. And both outcomes came from the same hiring process. That’s why understanding how those decisions were made and candidates were evaluated is a critical component of reducing staffing waste.