Simply stated, the way you hire new employees can make or break your business. Why? Because hiring the wrong people means more employees will leave your company, and that impacts the bottom line.
According to PayScale, for example, the cost to replace one employee is from 90% to 200% of their annual salary. For a worker who makes $50,000 a year, that's somewhere between $45,000 and $100,000—and that's for just one lost worker. Now do the math: if your small business employs 100 workers and 5 of them leave, your company just lost from $225,000 to $500,000 in annual profits. For small businesses, especially those struggling to pay the bills and maintain cash flow, that's potentially a recipe for disaster.
THE NEED FOR SMART HIRING
Simply stated, the old model of hiring, given these metrics, is unsustainable. The question of course is how recruiters can adjust hiring protocols to increase the likelihood of new employee success and longevity. Since the problem doesn't seem to be linked to skill levels, hiring managers need to determine (with some degree of specificity) what candidate characteristics are in fact determinative—and structure a hiring process designed to identify those traits in job candidates.
That process, sometimes called "smart hiring"—meaning hiring to advance employee engagement and longevity—begins by better understanding your company's culture. After all, new employees are more likely to be successful if their values align with those of the businesses for which they work. Step 2 is to create a hiring process that seeks to identify candidates with both the skills to perform and values that match those of your organization.
Imagine for example your business is a marketing agency, one in which employees value collaboration, a sense of humor and casual communications (think skateboards and no cubicles). You need a new graphic designer. After interviewing your top 4 candidates, you select the one with the most professional, contemporary design skills and hire her.
What you don't know (because you didn't look for it) is that your new designer prefers to work independently. She rarely steps out of her office, never joins her coworkers for lunch at the local eatery and communicates primarily through formal reports and email. It doesn't take a rocket scientist to conclude that she's not likely to be happy in her new job, and that before long she'll be hitting the streets, looking to join an agency that works the way she does.
THE "AWESOME FACTOR:" WHAT TO LOOK FOR
To begin, you can't hire the people who will stay with your business and help it become more productive and profitable if you don't know what to look for in job applications, screenings and interviews. And what you should be looking for is less about what job candidates know and more about who they are—and that "who they are" comports with company culture.
After all, if you discover a new employee lacks key skills to perform at an optimal level, you can provide them the requisite training to bring them up to speed. But you can't train your workers to be someone they're not.
Equally important, there's going to be a subjective component to the process of assessing how someone will behave within your business. But that doesn't mean the hiring decisions you make should be grounded in "gut instinct." In fact, there are effective strategies to identify which candidates will succeed within your company, including the following 4:
1. LOOK AT PAST BEHAVIOR
As the old truism goes, the best predictor of future behavior is past behavior. To learn how a candidate will behave in their organizations, interviewers need to ask questions that require candidates to explain how they solved a problem or approached a challenging situation in a previous job.
Think about our fictional marketing agency and soon-to-be disgruntled designer. To find evidence of cultural fit, the interviewer could have asked, "Tell me about that last time you solved a problem by going around formal channels." Odds are, the wrong candidate would have stumbled, and perhaps even confessed that she doesn't like coloring outside the lines—ever. The point is, if you know what your business values, you should be able to create an interview process that helps you find prospective employees who share those values.
2. LOOK FOR EMPLOYEES WHO LOOK LIKE YOUR TOP ACHIEVERS
There's a reason your top performers are your top performers. They have personal and work characteristics that mesh with the way your business operates.
This is where your managers can be helpful. Ask them to identify their top performers, and then to list the work characteristics they share—it could be things like attention to detail, responsiveness or flexibility, for example.
Once you've identified these "core characteristics" of your company's best of the best, you need to find the job candidates who most share those traits, this through a series of structured interview questions. For example, if your best workers are detail-oriented, you might ask, "tell me how you prepare a report." The candidate who tells you he first carefully researches the topic to find relevant data, creates a working outline, writes his report, edits it and shares it with a trusted colleague is more likely to be successful than one whose approach is more disorganized and scattershot.
3. GIVE JOB CANDIDATES A TEST
One of the best ways to assess a candidate's readiness to do the job is to have them do a job. Think of yesteryear when getting a secretarial job meant doing well in a typing test.
This will vary widely depending on the nature of the position, but you should be able to design a test that will give you a good indication of how someone works. For example, if you're hiring a customer service rep, you could ask him to respond to an incoming call from a dissatisfied customer. Does your candidate remain calm and effectively defuse the situation, or does he become combative and defensive?
4. ENCOURAGE REFERRALS FROM YOUR EMPLOYEES
Here's another truism: birds of a feather flock together. Asking your best employees to recommend friends (or even family members) for key positions increases the likelihood that those new employees will share the values and work ethic of your star performers.
Of course, you'll want to put those referrals through their paces to ensure a good fit. You also need to be sensitive to your company's diversity goals—in other words, make sure "more of the same" doesn't extend to the same gender, race or other index of a diverse workforce.
The success of your business is important. It's so important that you wouldn't purchase new equipment, replace legacy software or launch a new marketing campaign without doing your homework.
Is hiring employees who are likely to succeed any less important to the health and long-term success of your business? In fact, to ensure your productivity and profitability, you need to leverage best practice strategies in everything from the way you hire new employees to the way you do you manage your finances. That's where we can help.
To learn more about the ways our outsourced HR, accounting, payroll and bookkeeping services will help you become more profitable and grow your business, contact us today.