Hiring the right people for your business is hard. And often, costly.
But having the wrong person in a job costs a lot more.
The real cost of a bad hire depends on what you take into account.
Sales Leadership expert Ron Karr recently showed how, in one year, a bad sales hire achieving only 50% of their target could cost a company $697,000! The hypothetical rep had an intermediate to senior position, a base salary of $100,000 and a quota of $1,000,000. Half of the cost was attributed to lost margins, which could represent hundreds of thousands of dollars of lost gross profit—in this scenario estimated at $350,000 (75% of the $500,000 in lost revenue.) Wasted leads and/or lost customers represented another $150K to the company.
But that doesn’t apply to me at all, you say: “In my small business, my employees are paid by the hour and they’re providing services, not sales. It doesn’t cost that much to replace someone if they don’t work out.”What about the cost of inefficiencies in the business—lost productivity, poor attendance, damaged customer relationships, the effect on employee morale and even accidents and lost time? And you still have the cost of replacing the employee, which results in personal stress for you, the employee and the people they work with.
The need to hire and keep the right people to build your business and its value isn’t new. But as you and I know, the job market is becoming more and more competitive, with qualified candidates in high demand. At the same time, many recent graduates are unable to find jobs that allow them to grow and develop their skills.
I am looking for up-and-coming business brokers. And so are other Sunbelt office owners across Canada. That’s why I reserved time at our recent office owners meeting in Ottawa to have business coach Grant Mellow advise us about recruiting and hiring. As a result, we will be making changes to improve our hiring system.
Grant, who is with ActionCOACH, told us that 90% of a successful hire is attitude and fit with the team and the culture of the business. Yet many of us focus on an applicant’s skills or experience. These are essential requirements, of course, but think of them as the key to opening the front door of your hiring process; once candidates make it inside, we need to learn more about their attitude and fit, and if our/your business is the best place for them to thrive.
For those judgments, owners must have a strong hiring process that they consistently apply to each candidate—it is one of the best investments you can make in your business. We need to ask the candidates specific questions that help us learn about their fit, and, by selecting and using appropriate assessments we get a better understanding of how the future employee best works and relates.
The results of the first steps help us narrow the field further before we set up a face-to-face interview. The interview is then conducted with the information that matters and only with the right people.
Assessment tools for hiring and post-hiring management
There are many assessments to choose from. The most common and best known are assessments like DISC and Myers-Briggs. Another that Grant told us about is the PXT assessment used for pre-hire screening, onboarding, managing and strategic workforce planning.
Any assessment that you use should provide you with information useful for hiring and also post-hire management. While these are part-and-parcel options when you work with a hiring company, you can access each of them independently.
I used the DISC tool two years ago with the team in my Ottawa. As our exercise was structured around improving their selling skills, each team member was given performance tips specific to their personality type. We found it quite useful. You can read about our use of the DISC tool here.
A DISC assessment is relatively inexpensive and it’s what Grant recommends as a minimum if you want to take the “attitude-and-fit” approach to hiring.
Questions that help you determine fit with your business
Grant gave us some examples of questions to help determine a candidate’s fit.
What was the best job you’ve had? Why did you like it so much? What was your least favourite job? What did you not like about it?
Who was the best supervisor or manager you’ve had? What characteristics made that person a good manager? Think of the WORST supervisor or manager you’ve had. What characteristics made that person a POOR manager?
These questions help you get a sense of how these people will relate to others on the team and the manager(s) they will need to work with. How they will fit with their manager is most critical, Grant says. If you’re the manager, ask yourself what you will have to manage with this person.
Fit with the job comes second; fit with people around them, third; and finally, fit with the company.
Those that follow me will know that I’m a big fan of Jim Collins and the concepts in his book, Good to Great, to take your business from good to great. One of his business tips is that you have to start by getting the right people “on the bus,” top performers who share your company’s core values and purpose.
As Hiring Smart says, that means hiring the right people in the right roles, focused on the right things.
Sunbelt is actively looking to recruit and train business brokers to keep up with the growing demand for our services across Canada. We estimate the cost of a poor hire at $100,000 plus, so we are building a better hiring and assessment process using the suggestions and tools recommended by ActionCOACH. In a future blog post I will report on how effective they have been.
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