Employers often think they’re hiring the best and brightest, but I’ve discovered in my 40+ years of hiring and recruiting experience, that doesn’t happen all that often.

Have you ever hired someone who seemed like they’d make a great employee, only to realize you made a really bad hiring decision?

I’ve asked hundreds of hiring managers, “Have you ever made a bad hiring decision?” I have yet to find one that answers no. All 100% of them have experienced this problem.

Even when you hire an average employee vs. a top performer, your business is getting short changed at the bottom line. I’m talking about real dollars.
How Can You Calculate the Cost in $$?

Actually there’s a study that will help you calculate the cost. “The validity and utility of selection methods in personnel psychology: Practical and theoretical implications of 85 years of research findings” Psychological Bulletin, Sept 1998, Vol. 124, No. 2, pp 262-274.

Management and Professional Staff

According to this study, top performers produced 48% more than average workers. So, let’s assume that you’re paying an annual salary of $75,000. The cost to your business would be $36,000. At an annual salary of $125,000 your cost would be $110,000.

Now, let’s look at how that can compound your cost. Let’s say you’re a small company with four people at that level and an annual payroll of $300,000. If all are average employees, your business loss has just ballooned to $144,000. That has a devastating effect on your long-term business success.

It Gets Even Worse

When you hire a less-than-average person, things go from bad to worse. These employees produce 96% less than your top employees. So, using our annual salary of $300,000 from the above example, your loss has mushroomed to $288,000.

Skilled and Other Nonexempt Staff

The study found that skilled top performers are 32% more productive than the average performer and 64% more productive than the less-than-average employee.

For unskilled or semi-skilled workers, top employees outperformed that average employee by 19% and the non-performing employee by 38%.

An Example of the Annual Impact

Let’s take a look at the impact for a small company with a staff of 55 and compare the financial effect of hiring average employees vs. top performers. This is an easy exercise for you to do with your own company and I suggest you do it, because it can become the stimulus for taking steps to improve things.

20 average unskilled personnel with an average annual salary of $24,000 each would be an unskilled annual payroll of $480,000. ($480,000 X 19%) = $91,200.

25 average skilled personnel with an average salary of $48,000 each would be an annual skilled payroll of $1,200,000. ($1,200,000 X 32%) = $384,000

10 Management and profession personnel with an average salary of $75,000 each would be an annual management and professional payroll of $750,000. ($750,000 X 48%) = $360,000.

Total negative financial impact of hiring average workers For the company in our example, it would be: $91,200 + $384,000 + $360,000 = $835,200 or 34.4% of total payroll!

Your Conclusion?

If you draw the same conclusion that I and other motivated hiring managers, that would be you are pouring money down the drain. Regardless of your company size, large or small, the financial impact to your bottom line is enormous.

Taking my example above, would you purposely throw 34% of your payroll out the door? I doubt it. Thankfully there’s a solution for that.

The solution is to stop hiring average or below workers. Every time you replace an average person with a top performer, you increase your bottom line. This can mean hiring top talent, promoting and developing your good people. Change your focus to hiring top talent; every time.

Your Next Step

Give Carl Bradford a call today. Let’s discuss your hiring challenges and begin a journey to take your staff quality to the next level. 

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