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By Leslie H. Krieger, Ph.D., SPHR
Does hiring smart pay off in higher profits? You bet it does! In fact, hiring smart typically brings a much greater return on investment than does spending on process improvements or capital equipment.
Let’s look at actual ROI data from hiring smart initiatives we created for three very different businesses: debt collection, product distribution, and fast food.
CASE STUDY #1: A FINANCIAL RECOVERY AGENCY
Hiring Smart Investment: $30,000
Details: ATG helped the agency select debt collectors who quickly surpassed the national average of debt collected per month, enabling its 100 collectors to collect an additional $2.5 million per year.
ROI : 8,300%.
CASE STUDY #2: A PRODUCTION DISTRIBUTION COMPANY
Hiring Smart Investment: $80,000
Details: ATG helped the company select field sales associates whose first year turnover rate dropped from 54% to 28%, resulting in reduced annual turnover costs of $16.3 million per year
CASE STUDY #3: A FAST FOOD RESTAURANT COMPANY
Hiring Smart Investment: $150,000
Details: ATG helped the company identify better-fit store managers and team members, resulting in reduced turnover, faster customer service response and greater customer spending. This produced an overall bottom line improvement of $17 million per year.
These impressive, real-life returns on investment occur in part because of the economies of scale present in larger organizations. However, even smaller businesses can obtain measurable benefit from introducing a hiring smart strategy. Many smaller businesses don’t recognize that the true cost of turning over a non-sales employee typically equals half of that employee’s base compensation. So, turning over one $40,000 a year employee costs a business $20,000, factoring in the costs of separation processing, replacement hiring, new hire training and lost productivity and opportunity.
For example, a moderate-sized company might employ 20 people whose base compensation averages $40,000. At a 10% turnover rate, the costs of turning over those two people would be $40,000 per year whereas a hiring smart strategy typically would cost a company around $4,000 a year. If this strategy prevented just one turnover, the dealership’s annual turnover costs would be reduced by $16,000, giving them an ROI of 400%.
Early adopter companies have been using hiring smart strategies for over fifteen years. These strategies enable a company to match candidates against research-based models of key roles such as Designer, Project Manager, and Sales Executive, or to have custom plans created at a very low cost.
Although it can take between 18-24 months before meaningful investment returns can be calculated, there is every reason to believe that investing in a hiring smart strategy will have a very positive impact on a company’s bottom line.
Stop wasting HR dollars and start hiring smart. Contact us to get started.