What is the Worst Way to Hire?
- Steve Williamson, VP Digital Marketing and Content, eRep, Inc.
- Monday, May 8, 2023
Did you know that an empty role within your organization can cost you hundreds of dollars per day while it remains unfilled? Considering that, what is the worst — and best — way to fill that seat?
The Cost Clock is Ticking on Empty Roles
We all know turnover is expensive.
It can cost an organization up to 130% of a role's annual salary in lost productivity and revenue when an employee leaves and their role must be filled again.
It's not just the direct costs to hire the new person, either. In addition to paying for job listings, you also spend time screening candidates, conducting interviews, paying sign-on bonuses, etc. All of those activities cost you time and loss of productivity instead of working on more important things. You get the picture.
Employment experts have developed formulas that indicate it can cost you hundreds of dollars per day in lost revenue opportunity and reduced (or eliminated) productivity for every day that role remains unfilled. This cost can be even higher for sales positions.
The money clock is ticking, but don't just run out and hire the first warm body who says, "Yes."
Making a bad hire can be even more costly.
There are two things you must accomplish to minimize the financial bleeding of an empty role:
- Hire the right person for the right role
- Hire efficiently
These priorities are listed here in order of importance. Notice the word "quickly" is not on that list.
There is a subtle yet important difference between hiring efficiently and hiring quickly. Making a quick hire is all about time and has nothing to do with quality. Like Superman and Clark Kent, you never see both in the same room at the same time.
A quick hire can easily lead to much greater costs in the numerous hassles and headaches that inevitably spring up when the first candidate with a pulse agrees to take the position.
To look at it another way, most efficient hiring processes tend to be quicker than inefficient ones, while few quick hires are efficient.
Efficient hiring processes are usually cost-effective processes, too.
Cost-effective hiring processes may actually have an initial up-front cost that's a bit higher than a "quick" hire, but will save you a lot more money in the longer term (sometimes paying for themselves in a single month).
Let's look at an example of how three different hiring approaches can play out.
Three Hiring Scenarios
Here's a hypothetical example of a fictitious company replacing a critical employee in three different ways.
You are an automotive services company that provides high-end paint jobs for luxury sports cars. We know, it's a tough job but somebody needs to make those Koenigseggs and McLarens look good. Your Production Manager, the individual who oversees daily operations out in the shop, is leaving in a month and must be replaced.
Here are three possible ways to make the hire:
The Standard Way
1. You place paid ads on all the top job boards, do a quick eyeball scan of the 100 candidates who apply, you conduct 15-minute phone interviews with the top five based on the presence of "automative painting" and "supervisor" keywords in their resumes, conduct an in-person interview with the top candidate, and make an offer. Total elapsed time: 3 weeks.
The Cheap Way
2. You place a few free ads on some car enthusiast forums and after a month you have 40 applications and resumes to review. Most are teenagers or car buffs who think having a poster of a Pagani Huayra on their garage wall, next to where they park their 1992 Toyota Camry with a spoiler, qualifies them to lead your paint crew. You find three that aren't obnoxiously unqualified and conduct interviews. None of these three have solid skills or experience, but one of them is a personal friend of one of the shop crew (an all too common hiring method) and you bring them onboard. Your previous Production Manager left two weeks prior so the position has been vacant for ten working days. Total elapsed time: 6 weeks.
The Right Way
3. Your executive team and your current Production Manager sit down with a hiring specialist from eRep to evaluate the functional needs of the role and come up with a Top Performer Profile™. This specifies the particular psychometric profile of the ideal candidate, complete with the optimal Core Values Index™ psychometric assessment scores. You place a single job listing with eRep, which goes out across the country via seamless integration with ZipRecruiter. Applicants take the CVI and their scores are compared against the role's TPP scores. The top five candidates, with CVI profiles "highly recommended" to the role, are identified, the top three are reviewed for experience and qualifications and brought in for interviews, and an offer is made. Total elapsed time: 4 weeks.
Hiring Options Analysis
The Standard Way is the most common because it's what many business leaders and HR managers are most familiar with. You pay for job listings, screen resumes by hand and conduct interviews, then make an offer. It's the way things have been done for decades. Considering the position was filled within three weeks, you feel this was the most efficient and least expensive way to go.
But there are hidden costs that rear their ugly head not too far down the road. There are decent odds the person hired to become the new Production Manager may become disengaged and leave within a year. Meanwhile, because they weren't psychometrically suited to the role, their attitude rubbed off on the paint crew (no pun intended) and morale suffered. Perhaps one of their subordinates quit to work for the competition. Maybe (likely?) a few customers were unhappy with the quality of the paint jobs on their Mercedez-Benz SL65 AMG and demanded the job be redone — at your expense.
The second option, The Cheap Way, is fraught with peril. You saved money up front by going with free job listings, but the job was left vacant for two weeks, costing you a lot of money in reduced productivity (at an estimate of $400 per day, there's $4,000 in lost revenue just in that alone). The person you hired lied on their resume about some key skills, and although they were a fairly good painter at their previous job and were recommended by one of your staff, they actually had zero supervisory experience and the current crew hates working for them. Your production quality dropped so much your reputation in the small but well-connected high-end sports car community tanks and within a year you're laying people off due to lack of business.
You saved a few dollars by going with cheaper job listings, but the job was left vacant for two weeks, costing you a lot of money in reduced productivity.
The third option, The Right Way, is the most expensive up front — we'll be honest about that — but it's the most efficient and cost-effective by a wide margin. It not only saves you money and time, you actually see an increase in revenue because the quality of your team's work consistently exceeds your customer's already high expectations.
When your team is led by someone who is innately hardwired to excel in their role, rock star status becomes the appropriate buzzword around the shop.
Your customers say, "Amazing!" and "Highly recommended!" not only to you, but to many others at the area Cars & Coffee and Concours d'Elegance events. "Who did your paint job? It's beautiful!" gets around real quick.
Your excellent word-of-mouth buzz means bookings are scheduled months in advance and you're strongly considering moving into a bigger shop and expanding your crew — all because you hired accurately through a Top Performer Profile and the Core Values Index.
The Good News of Hiring Accurately
These scenarios are shocking because they're all too realistic based on the experiences we've seen in the business community. Exasperated employers have come to us because their business is at risk of utter failure and they finally realized the inaccuracy and inefficiency of their old-fashioned hiring process was the likely cause.
There is data to back up the Top Performer Profile approach. Time and time again, workers who are placed through their TPP+CVI match will outperform their un-aligned peers by 200% or more (productivity) and stick around much longer with 50% or lower turnover. Remember, every time you have to re-hire for a given role, you will likely lose tens of thousands of dollars in lost productivity and revenue, sometimes exceeding that role's annual salary.
FACT: Employees hired through a Top Performer Profile are often 200% more productive and experience 50% or lower turnover.
The Efficiency of eRep's Integrated Hiring Suite
Every aspect, from the job listing to the Top Performer Profile to the candidate's CVI scores to the integration with your team's accounts once a hire is made is all seamlessly managed in one place through a cost-effective subscription to eRep's talent acquisition and talent management suite.
The alternative is to place an ad on craigslist, hire the first warm body that says yes, and take your chances.
Core Values Index™ and CVI™ are trademarks of Taylor Protocols, Inc.
Go to eRep.com/core-values-index/ to learn more about the CVI or to take the Core Values Index assessment.
Innovator/Banker - VP Digital Marketing and Content, eRep, Inc.
Steve has a career in project management, software development and technical team leadership spanning three decades. He is the author of a series of fantasy novels called The Taesian Chronicles (ruckerworks.com), and when he isn't writing, he enjoys cycling, old-school table-top role-playing games, and buzzing around the virtual skies in his home-built flight simulator.
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