Thankfully, a culture shift has since swept the workforce, and today's crop of managers is dramatically more enlightened than their predecessors. More than that, today's crop of the working class is more engaged with the value they bring to the communal endeavor, and more likely to make professional choices according to where their contribution is most appreciated and effectively utilized. Taken together, the latest generation of the North American working population possesses a much more sensitive appreciation for the human toll of sustained corporate success. I like to call this crew “the Facebook crowd.” They demand to be treated uniquely. After all, they've been the subject of special attention all of their lives. Whenever I come into contact with these folks, I'm wowed by their need for individualism. They want to be understood and to be seen as sources of light. They want the “big data” on their strengths. They want to know who they are.
There has never before been such a fierce need for human analytics in the workplace, and in work-life balance. The battle cry that human capital is the most important capital of all is ringing loudly throughout the land.
The Awakening
It was a transformation whose time had resoundingly come. The world couldn't continue to function inside of an arrangement that rewarded one so unjustly at the expense of another – and still expect growth and success. The human piece. The future will be one where the number of jobs available will exceed the talent available. It will be a fight for “free agents,” a path to find the best employees and also to keep them. The generation coming into the emerging companies grew up differently and has much less loyalty as part of its DNA. It will be “caveat employer.”
Employment-granting executives must experience a dawning realization that they must find the right employee for their culture and either be hyperaware of employee discomfort with workaday lives or be ready for days, weeks, or perhaps even years in lost productivity – big time.
Sourcing, attracting, and training employees is an expensive enterprise, and if the inducted staff member proves a bad fit for the company once he's an established member of its ranks, well, the money's already been spent. In larger companies, you “hide” him by moving him to another role. After all, you can't admit an error because that would reflect badly on you. Sometimes you need to hire the “best warm body” to get that tick mark for yourself in the quarterly report. Who cares about hiring someone appropriate, just so long as you get that bonus, right? The employee will work it out. Never mind that he was wrong for the job. Never mind, either, the indirect costs associated with finding, interviewing, reference-checking, and onboarding the newbie. And never mind that the cash will now need to be spent again – to source and attract the next guy and bring him similarly up to speed.
On average, research from business information firm Dun & Bradstreet reports, it costs some $90,000 to attract, identify, hire, and train an employee whose managerial position pays $60,000. For a staff of 10 employees, that's $900,000. Still, it took an alarming amount of the world's time to come around to this reality and to finally pay this most critical ingredient of the recipe – considering its potential to impact an organization's fortunes – the attention it warrants. When a CEO sees the real ROI on preventing bad hires, it catches her attention.
The Cost of a Bad Hire
And so the first step to ensuring future success for an organization is to get a grip on the human resources that power it. Managers misunderstand the value of the individuals that populate their company break room at great risk and expense. Research demonstrating the cost of a mismanaged workforce – and the value of a well-managed one – abounds.
Certainly, there are direct costs that can be immediately measured – the most significant of which is an employee's salary and benefits. But it's in the muddy hallways of “indirect” costs that we run into trouble. Think loss of productivity; the expense associated with other staffers' recruitment, hiring, and recovery time; and the often considerable expenses of training a new employee for his assigned post.
The specific figures tracking the outlay of a bad hire for a company run the gamut, but all are sufficiently distressing. Estimates range from $7,000 for replacing a salaried employee, up to more than $53,000 for a staffer earning an annual salary of $40,000. The Society for Human Resource Management has suggested that replacing supervisory, technical, and management personnel can cost a company between 50 percent and several hundred percent of the individual in question's salary. The U.S. Department of Labor estimates that the average costs of a bad hire may “equal 30 percent of the first year's potential earnings.” According to a report by the Institute for Research on Labor and Employment at UC Berkeley, turnover in management positions often costs 150 percent of the salary of the staffer in question. And another estimate – this one taking into consideration hiring costs, total compensation, the expense of maintaining the employee, disruption costs, severance pay, mistakes, failures, and missed business opportunities – submits that the termination of a second-level manager earning $62,000 a year in a position he's held for two-and-a-half years will deliver a bill to his company worth a whopping $840,000.
And outside of all these calculations is the intangible burden of discomfort with which a bad hire taxes a manager's psyche. Hire a guy who doesn't succeed on the job and endure a unique kind of failure. Sure, the flagging staffer pays the ultimate price in the loss of his employment, but the manager who brought him on board does not escape the experience unscathed. Thanks to such a misstep, the hiring process – and all the hoop jumping it entails – have to be endured all over again. The ad has to be reposted, the candidates have to be rescreened, the interviews have to be reconducted, the forms have to be rewritten, the introductions have to be remade, and the training has to be redone. And so on. Such an uncomfortable ordeal leaves a scar on every last soul who participates in it. An argument can be made that those managers with the better “golden-gut” intuition can do better in the selection process. But how much better? An interview is really only about as good as a coin toss in this game.
Who knew that getting the right fit the first time matters as much as it does? Um. You should have. For most other “asset” purchases, you would have done your research and you most certainly would have “insurance” on them. A data-driven, people-founded asset plan makes business sense and reduces risk for any organization. Most managers do more research on the type of vacation they want to go on than in selecting the team whose labors will enable the time to have that vacation.
Why Things Fail
From the anxious marketing manager with a taste for attacking challenges aggressively to the retiring executive assistant who would sooner ask questions than provide answers, every workplace is awash in unique personalities. Assuming a personnel assemblage is made up of only like-minded characters, each with essentially the same needs, predispositions, and outlooks, is not only a lazy approach to human resource management, it's an erroneous one. Every last one of us travels with baggage; it's the clever business leader who can sort through the collection and make the smartest choices for how to best manage it.
And if you're still skeptical about the importance of marrying individual behaviors with both the task at hand and those that characterize the other players in an office environment, just ask a kindergarten teacher. She'll tell you it's a constant trick, finding the balance between one person's preferred ways and means and another's. My wife, Patty, has taught younger learners for years. She is a great teacher, in part because she realizes that her approach to each learner needs to be unique, and that there's less “drama” when the preferred ways are understood. Patty knows that in any of her classes she will have three camps: a group of “learners” who are sponges for knowledge, a group of “vacationers” who are in class because it consumes time between meals and parents, and a group of “prisoners” who hate school, hate process, and will always lead troubled lives.