According to the Center for American Progress, replacing one employee can cost a company more than 21 percent of that employee’s annual salary, on average. Other estimates assert the cost can climb to 400 percent of that salary, depending on the position and level of experience.
While those numbers may be shocking, we’ve known for years that high turnover rates result in losses in productivity, added expenses for recruitment and training, decreases in quality and output, and many more problems.
So the question is “What are you doing about it?”
Many conditions can contribute to employee turnover, including non-competitive pay, poor leadership, workers feeling undervalued and unrecognized, or a dearth of opportunities and challenges. But in my experience, turnover is more often rooted in bad hiring practices that haven’t changed for years.
Three unique strategies can maximize the involvement of internal team members to help you hire the best people for your company and keep happy employees on board.
1. Peer Hiring Teams
Traditionally, either HR or hiring managers interview applicants one-on-one. A better approach is to have peers with whom candidates would work on a daily basis conduct interviews as a group.
The peer hiring team determines criteria applicants are measured against and hires by consensus. The team receives specialized training that equips them to ask open-ended, probing questions and analyze the responses for the purpose of making a selection. Most importantly, these teams are trained to screen candidates based on attributes, not past work experience. Often referred to as “behavior-based interviews,” these are said to be more than five times more predictive than traditional interviews.
Not only do multiple perspectives create a more comprehensive picture, but peer interviewers, who know the job better than anyone, also tend to have higher standards than people who won’t work with the applicants directly. These higher standards ensure new hires will fit in with co-workers and stick around longer. According to CEB, 73 percent of new hires have the knowledge and skills required for a job, but only 35 percent are a good cultural fit.
Hiring teams that take ownership in the hiring process become more invested in the new hire’s success, which makes the onboarding experience more positive and greatly contributes to retention. Moreover, teams will work to avoid bringing in someone who doesn’t meet their criteria. To them, a poor hire means lost time in training and personal productivity — and if a new person doesn’t stay long, they’ll soon be short-staffed again.
As a bonus, peer hiring fosters mutual respect by trusting employees with important roles and creates a constant stream of well-qualified, internal candidates for promotions.
2. Job Simulations
Whether you’re hiring six people or 60, your evaluation method should help separate the most effective workers from those who just interview well. Job simulations let you observe candidates performing key activities that will be critical to their success on the job before they’re hired.
One report based on 85 years of research by Frank Schmidt and John Hunter shows that job simulations are the highest predictor of job performance. Because of that, many high-performing companies are applying job simulations to all positions in the organization.
- Entry-level simulations are used to hire many workers at once, such as in a startup situation. Groups of five to 25 applicants who make it through initial HR screening are invited to take part in a 1.5- to 3-hour simulation that requires the group to solve a series of exercises. This method has been described as “magic” because you can see how applicants work in teams and react to obstacles and quickly identify star candidates who aren’t afraid to speak up. JEDA Polymers conducted entry-level simulations after relocating its manufacturing facility, leading co-owner Ronda Haskell to report, “I never realized you could find out so much about a person without asking a single question.”
- Experience-required simulations are used to hire for positions where past work experience is imperative (e.g., engineers, technicians, or managers). Top candidates are asked to perform a customized 1.5- to 4-hour work simulation conducted by the peer hiring team that focuses on tasks and interruptions common to that position.
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Midwest Industrial Supply successfully uses these simulations to hire outstanding candidates who have wonderful technical attributes and are a great culture fit with Midwest’s values. “Once we find a great candidate, we want to see how that person works in real-life situations,” CFO Mark Schoolcraft says. “Job simulations have allowed us to do that, and the results are awesome.”
3. ‘Stay’ Interviews
Stay interviews are short (20 to 30 minutes), structured, one-on-one meetings with employees that are typically conducted by a direct manager or supervisor. Questions are open-ended so employees can share whatever is on their mind. These may include “What do you like most about working here?” or “If you could change something about working here, what would it be?”
Unfortunately, most companies only practice exit interviews — the ugly cousin of stay interviews and the stuff of legends. We’ve all heard tales of bedraggled, irate, or catatonic employees with cardboard boxes of personal items in hand being pulled into an office on their last day to be asked fatuous questions like “Why are you leaving us?” or “What could we have done better?”
Exit interviews are lag measures to address things that already happened — a classic case of “too little, too late.” But stay interviews provide a vital lead indicator that’s predictable and “influenceable” to help you resolve problems before employees become turnover statistics.
Stay interviews show you what employees enjoy about the company’s processes, culture, and leadership so those areas can be strengthened, celebrated, and reinforced by company leaders. Factors causing employee dissatisfaction should be targeted for further analysis and improvement.
Statistics about employees who quit within their first year are alarming: About 35 percent leave within the first six months. Stay interviews, used in conjunction with onboarding processes, can play a significant role in reversing that trend.
Too many companies wrongly focus on the cost of solutions without accurately evaluating the cost of doing nothing. But leaders in fiduciary positions need to solve problems, and a high turnover rate is a big one. Luckily, the cost of implementing one of these solutions is easily offset by the retention of just one employee.
Despite all the data and research to support this, many companies continue the same traditional approach that gets them the same traditional results. But I’m wondering, “Why aren’t smart executives and HR professionals aggressively pursuing these strategies?”