Tuesday, September 23, 2014

Employee Turnover - What does it really cost?

In this article I will primarily reference the Healthcare IT Industry but the information provided can certainly be applied to any industry.

Employee turnover is one of the costliest issues a company can experience.  Consider that for every employee a company loses, that is a loss of productivity not only for the position the employee vacated but for HR / Recruitment who must source candidates, for the Manager of the position that must spend time interviewing new candidates and then train the new employee and for anyone that must take on the added work-load of the lost employee until a new person is found. 

For all jobs earning less than $50,000 per year, or more than 40% of U.S. jobs, the average cost of replacing an employee amounts to fully 20% of the person's annual salary.*  While positions under $30,000 are typically a bit less, higher level positions paying over $50,000 a year can result in even bigger financial losses, up to 213% of employee's salary states CAP (The Center for American Progress).  When drilling down to the basics; employees stay where they WANT to work.  In other words, create a strong company culture/environment and your turnover will be low.  Part of creating a great workplace is hiring the right people and that is what we're going to talk about.

Being in the Recruitment Industry for over 15 years, I've witnessed an astronomical amount of turnover.  I'm not looking a gift horse in the mouth, if not for that turnover I possibly wouldn't have a job, however, much of the turnover I've witness could've been prevented had the hiring manager used better interviewing techniques.  There is no perfect solution to turnover, regardless of how well you chose there will always be situations where the person hired doesn't turn out to be the right fit for the job.  Some people are just great at interviewing.

Here are a number of steps that will lead to more thorough interviews.
1.  Pre-screen the person on the phone prior to an in-person interview.  By simply spending a few minutes on the phone with a candidate you can gain a lot of information on personality, technical qualifications, punctuality, level of enthusiasm, availability etc.
2.  Prep the candidate for the interview as little as possible.  You can tell them when / where / how long etc but don't tell them how to dress (unless they ask), what to say, how to present themselves etc.  You want to find out who this person is, if they're interviewing for an Executive Assistant to the CEO opportunity and they show up to the on site interview in jeans and a t-shirt, chewing gum you know immediately this isn't the right person for the job (unless maybe you work for a technology start up that's owned by a 17 yr old)
3.  Ask the right questions - this is truly the most important point!  Stay away from all those articles  about great questions to ask during an interview.  My personal least-favorite is: "Where do you see yourself in 5 years?".  No one truly knows the answer to that question and even if they have a good idea and tell you so, life changes constantly, what they tell you today could be completely different 6 months from now.  I had a candidate tell me recently after an on-site peer group interview that they'd asked her that question and she felt no matter how she answered she'd be "screwed" - why?  because if she answered that she wanted to move into management her potential peers may be threatened and if she said she wanted to stay at the current level that they may feel she wasn't motivated.  Basically when you ask canned questions like "where do you see yourself in 5 years" - you're going to get manipulated, that candidate is going to tell you whatever he/she feels is the answer you're looking for.  The best questions to ask are open ended, get to know you questions.  Look at that person's resume and PULL things from it - is there a list of hobbies or volunteer work?  Ask questions about that.  (Ex:  Why did you chose to volunteer for the American Heart Association?)  Lets face it, technical / professional skills can be taught but personality cannot.  The more you draw out about that candidate's personality the more you're going to know about how well they are a fit for your company.  If you're staffing a contract / temporary position and you just want someone that can do the work, but you're not really concerned about personality fit - use the same open ended question method regarding their technical skills.  If there are specific technical skills that are required ask the person for an example of their work, if that is not possible - review their resume and ask questions that will have them explaining how they went about a specific task. (Ex: it says on your resume you were heavily involved in the Cerner Ambulatory implementation at XYZ Hospital System, can you explain what your day to day technical responsibilities were?)
4.  Let them ramble. Typically I'll let a person ramble.  Some recruiters / hiring managers may feel this is a huge time suck, however 15 minutes on the phone certainly isn't enough time to truly figure out if someone is the right candidate for a job.  The more people talk about themselves the more comfortable they get and the more comfortable they get the more valuable the information.  What that means is that there will be times when you're completely floored by what people tell you.  The interview will start out professionally, they will likely share the information they know you want to hear, but as you ask the right open ended questions and the candidate starts to feel friendly toward you they will sometimes divulge imperative info.  I've had candidates bash previous employers, admit to inappropriate behavior at a previous work site, say some absolutely off color things I cannot repeat here, admit to drinking on the job, discuss their personal relationships, fess-up to not knowing the technical responsibilities of the job, reveal prior felonies, admit to inaccuracies on their resumes and so on. 
5.  Go with your gut!!  I've stated this in other posts, but its always worth repeating.  My gut has never been wrong - I haven't listened to it enough to know.  Each time I've had a gut feeling that a candidate is going to "flake" on a position they've accepted, or felt they might be hiding something or that they are going to cause problems on a contract my gut has always been right.  I'm now starting to heed the warning my instincts are giving me and decline the person for further interview.  Always better to take the time to find another person than suffer the turnover of a person you knew wasn't right for the job.
6.  Interview them again. Never go with your first impression.  Each of us has a personal life and even though it would be fantastic if it never interfered with our professional life that is impossible.  If you REALLY like a person's resume and your first impression over the phone isn't so great but something is telling you they may be the right person for the job - interview them again.  If you're super happy with someone after the first interview - interview them again anyway.  Also, don't be the only person to interview them whenever possible, always try to have another manager or a team member interview the person to get a 2nd opinion.  Companies that allow team members to interview and weigh in on each hire have a lower turn over rate.  When the entire team feels that their opinions are valued and they have a say in their team dynamic the team is more successful.

Keep in mind there is no foolproof method of interviewing and hiring.  If you're great at picking the right people, but the culture/environment at your company stinks - you are going to have high turnover.  If your company has a great culture but you're consistently losing people take an honest look at your interviewing techniques.   High turn over can be prevented.

*CBS Moneywatch

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  1. From LinkedIn: Excellent write up, point on! - Tina Gaarder

  2. From LinkedIn: Right on Cherie! I just recently gave the same exact advice to a consultant who mentioned she was having difficulty finding a place. - Jill Kinney

  3. From LinkedIn: All good points Cherie. I have seen many clients not take the initial conversations with recruiters seriously and they were not even considered for the role. - Ruth Smith

  4. Thanks for this informative post! As an HR specialist, I totally agree with you. Employee turnover is a very costly issue and companies should be afraid of it. Loss of every employee is a loss of productivity and money. That’s why it’s important and necessary for every country to create decent labour conditions and respect its employers. When an employee leaves a company, there may be a need of quick and easy payday loan online to make ends meet but it’s a financial stress for a company also.