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The Reason Companies Should Calculate Cost Per Hire

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Every once in a while, I run across an article that talks about why organizations shouldn’t calculate cost per hire. Personally, I’m a big fan of the cost per hire metric. I think it provides valuable information.

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Back in 2012, the Society for Human Resource Management (SHRM) worked with the American National Standards Institute (ANSI) to create a uniform standard calculation for cost per hire (CPH). Basically, here it is:

CPH = (External Recruiting Costs + Internal Recruiting Costs) / Total Number of Hires for a Time Period

External recruiting costs include agency fees, advertising, job fairs, college recruiting, relocation, etc.

Internal recruiting costs include salary and benefits for everyone involved in the recruiting process as well as recruiting software, etc.

According to SHRM, the average cost per hire in 2016 was $4,129.

I believe the goal of calculating CPH is to provide organizations with a benchmark for their recruiting activities. Let’s say the organization is planning to open a new location next year. As a result, they will need to hire 10 employees. CPH gives the company some estimate to consider when it comes to the cost of staffing the new location.

CPH can also be a valuable number to share with hiring managers. I like to calculate CPH at the beginning of interview skills training. It’s an opportunity to put a dollar value on the cost of a hiring manager’s decision.

The goal of calculating CPH isn’t to make it $0. I don’t know if that’s even possible. Even if you’re the greatest place to work of all time, you will still have recruiting expenses. The goal of calculating cost per hire is to make sure the cost is acceptable. For example:

  • If the company decides that it’s going to buy a recruiting software solution because it will save the company money, how will they know the return on their investment if they don’t calculate cost per hire?
  • If the company is considering recruiting process outsourcing (RPO), how will they know if outsourcing makes sense for the business?

These are just a couple of examples, but you get the point. If the organization doesn’t calculate CPH, how will they know the cost? And on a strategic level, if HR gets the buy-in of senior management to add/change/delete components in the recruiting process, how will they sell the change (meaning what’s the measurement of success)?

Now, I get it…there’s lots of talk about quality of hire being the best recruiting metric. I’m not opposed to calculating quality of hire. However, it is a complicated metric by comparison.

And I know we sometimes hate to talk like this but quality of hire is based on the company’s budget. Organizations do not have unlimited funds to pay people’s salaries. So, quality of hire is relative to cost per hire.

Ultimately, organizations have to decide the best measurements for success. There are some old school metrics that still provide value. If you know how to use them.

Image capture by Sharlyn Lauby at a client’s site somewhere in Fort Lauderdale, FL

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The Only 3 Reasons to Send an Email

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Email has been around since 1972. It’s an essential part of communication today. Which is why it’s so frustrating that, after all these years, there’s not some definitive list of email protocols. And I’m not just talking about “typing in all caps means you’re shouting”. I’m referring to when is it okay to send an email.

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According to a report from McKinsey Global Institute, workers spend on average 28 percent of their time each week reading and answering email. A full-time employee (working 40 hours a week) spends over a day of their workweek on email. Wow! When we talk about making work more engaging, wouldn’t it be nice to give employees some of that time back?

I realize we’ll never eliminate email. But we can get better at using it. I wish I could remember where, but I heard a speaker recently say that there are three situations (aka “the 3 D’s”) when it’s okay to send an email:

  1. DATA. This makes sense to me. We can send people data to review or analyze prior to a meeting. People can receive the data or information that they need to get their job done. The challenge is making sure we send data to the right people. And in the right timeframe.
  1. DECISIONS. We can send people emails to ask for permission or authorization to do something. We can send emails after sending data to ask a person for their opinion or decision about something. This is a good way to communicate if you want to give someone time to think prior to deciding.
  1. DELIGHT. When I think of delight, my mind goes to announcements like “Please congratulate Jose on his promotion to marketing manager.” Or “Leonard has our bowling team t-shirts in his office. So, stop by and pick yours up.” A delightful situation is one where a celebratory announcement is being made.

When we think about the emails that we send to others, does it fall into one of these categories?

Here’s the thing, though – in examining my own emails, I could immediately see how data, decisions, and delight are very open to interpretation. I can also see how companies could use the 3 D’s as a starting point toward developing internal definitions about how email should be used.

Organizations could use the 3 D’s in orientation and onboarding to talk about the best way to communicate within the organization. HR could use data and decision emails to communicate with employees about benefits. Managers could learn how to use delight effectively and appropriately to recognize employees.

The 3 D’s could be the start to defining email protocols. It’s true, they need some definition. However, the results could be fantastic. Less email. Less frustration. More engagement.

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There Are Not Apps for Everything – Friday Distraction

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Remember the old iPhone commercial, “There’s an app for that.”?

There are a lot of apps available to us. Apps for banking, well-being, photography, and of course, games. It could be said that we’ve become an app driven society. And that might not be a bad thing. Apps can really help us in our personal and professional lives.

But today’s Time Well Spent cartoon from our friends at Kronos reminded me that apps can’t do everything.

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While an app can provide us with certain amount of information and enjoyment, people are still a key differentiator in business. I don’t ever recall a time when I decided to do business with an organization solely because they have an app. Sure, an app might be nice but the people I interact with create the memory and the credibility of the company.

Businesses need to keep this in mind when it’s budget season. Sure, allocating some dollars to create or update an app is a good thing. If your competitive set has an app and you don’t, it’s something to seriously consider. If you haven’t updated your app is years, it’s time to figure out what’s in the next version.

But, organizations cannot develop apps to the exclusion of customer service. I don’t hear anyone saying, “I’d buy from XYZ Company in a heartbeat. Their customer service sucks but their app is a winner!”

Same goes for management and leadership development. Not sure I can hear employees saying, “I love working here. My manager is a jerk, but the app the company developed for employee learning is the best.”

You get my point. Apps are great. This really isn’t an anti-app post. Apps don’t replace people. And all the artificial intelligence talk in the world isn’t going to change that. At least for now.

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Employee Engagement Isn’t a One and Done Activity

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I’ve written about employee engagement quite a bit over the years. At this point, I think we all know it’s important and companies need to focus on it. But it’s also important to understanding that engagement isn’t necessarily the goal.

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What I mean by that is the goal should be what engagement creates. Research shows us that:

Organizations aren’t building world-class candidate experiences, designing excellent onboarding programs, offering competitive compensation and benefits, and delivering outstanding career development just to say, “Okay, everyone’s engaged now. We’re done.” They’re creating all of these programs to get the results that come from engagement.

Which means that organizations and employees need to view engagement as a continuous activity. Something that the organization does all the time. Think of it as a process, not an event.

It also means that organizations and employees should be prepared for there to be peaks and valleys in engagement. It’s okay if an employee comes to work in a bit of a funk. They’re smart. They understand that they need to still do their work and deliver excellent service. They also understand that they can’t be in a funk forever. So, companies have to cut them a little slack.

Same goes for organizations. Companies make mistakes. It doesn’t happen every day, but when it does, the company needs to fess up and apologize. They need to make it right for the people who were impacted by the mistake. And they need to work hard to make sure it doesn’t happen again. And employees and customers need to give them the benefit of the doubt.

The reason I’m writing about this is because during this year’s SilkRoad Connections Conference, Ben Eubanks, industry analyst for Lighthouse Research & Advisory, shared that experiences will be the next evolution of employee engagement. If that’s the case, then we have to realize that experiences aren’t always going to be perfect. And the recovery from the little speedbumps that happen will drive engagement as much if not more than the perfect moments.

So, when we’re thinking about employee engagement, we need to think about having more good days than bad ones. That goes for employees as well as organizations. Employee engagement isn’t just something that companies are responsible for. Employees should want engagement for the same reasons that companies do. Because if an employee is engaged then they’re happy, productive, and creative.

Image captured by Sharlyn Lauby after speaking at the SHRM Annual Conference in New Orleans, LA

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Apply the Right Solution To the Situation

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I heard a speaker recently mention Type I and Type II failures. The way they described it was, a Type I failure is an irreversible failure and a Type II failure is reversible.

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One might say that Kodak is a case study in Type I failure. A recent article in Harvard Business Review summed up the story pretty well. A generation ago, a ‘Kodak moment’ was something worth cherishing. Today, it represents the need for businesses to be agile. Kodak’s decisions about their business model had irreversible consequences to the organization.

A Type II failure can involve a range of situations. For example, an organization hires a new CEO only to realize they’re the wrong person for the job. Or a company spends thousands of dollars buying a technology solution that doesn’t work the way they wanted. Or a strategic marketing partnership between two companies that doesn’t yield expected results. All of these situations can be fixed by making a change. It doesn’t mean there wasn’t any damage done. But hopefully it’s reversible.

The point that the speaker was trying to make with the Type I and II failures is that organizations need to apply the right solution to the problem. Think about it. It applies in both situations.

How many companies make a big (but reversible) failure and decide they can no longer compete? They don’t take the lessons learned and apply them.

On the other hand, how many organizations make an epic (Type I) fail and don’t see the writing on the wall? They think they can fire the CEO and that will miraculously bring their customers back.

While there’s no sure thing to avoid failure, there are three actions that companies should consider:

  1. Don’t stop planning. There’s a benefit in strategic and operational planning. It brings people together for the sole purpose of discussion about the organization. People get to ponder, plan, and spitball ideas. Consider possible failure scenarios during planning. Just remember to savor the moment – planning is a necessity not an activity to be quickly shuffled through. And diversity of thought is the key to successful planning.
  1. Regularly monitor progress. Once a plan is in place, the work isn’t over. The plan is based on a set of assumptions. External factors can change those assumptions at any moment – especially in today’s work environment. Some things to watch for include customer comments, competitor activity, and government action. When changes happen or start to trend, it’s time to get people together to figure out if a response is warranted.
  1. Change or abandon the plan. It’s time to put egos aside and realize that sometimes it makes good business sense to alter or even stop the current plan of action. That is not an admission that the idea was bad or the implementation failed. It means the circumstances under which the decision was conceived have changed, and the organization needs to change along with it. It’s possible that, with a little tweaking, the plan could be stronger than ever.

Making organizational decisions is tough. Mistakes will be made. The question becomes, are the mistakes Type I or II and what can the company do when mistakes happen. It starts with using the right methodology so the proper solution is applied to the situation.

Image captured by Sharlyn Lauby just off Duval Street in Key West, FL

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Everyone Should Be Part Of Your Recruiting Team

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I was recently at a conference where a senior vice president of human resources said, “The war for talent is child’s play. Candidates are coming to interviews with 8 or 9 job offers and asking, ‘What are you prepared to offer?’”

Now I must admit, that might not happen in every geographic region or in every industry. But we all know that there are companies with some real recruiting challenges. Some are so serious that companies will let high performers basically write their own offer letters.

 

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I’m all for candidates being able to negotiate a great offer. But for organizations, there is a fine line between negotiations and feeling you don’t have a choice. Organizations want to hire the best talent. They don’t want to feel that they must hire someone because they can’t find anyone else. Frankly, candidates shouldn’t want to be hired under that set of circumstances either. Candidates should want the offer because they were the best. Not because they were the only one.

To help organizations get more candidates in the talent pipeline, I believe that companies need to get employees involved in the recruiting process. Encourage them to share job openings with their networks. Thank them for sending candidates your way, even if the candidate wasn’t selected.

At this year’s Great Place to Work Conference, I heard several CEOs speak. From large companies, too – PwC, AT&T, Marriott, etc. Every single one of them at some point in their presentation said something like this:

If your company doesn’t pay fair…

If they don’t train employees and invest in your professional development…

If your manager doesn’t respect your work/life balance…

… call me. We want to hire you. Our vice president of talent acquisition is here.

That’s right. In a conference focused on creating great places to work, CEOs were broadcasting their recruiting messages. That reinforces the SVP of HR’s comment at the beginning of this post. War for talent? Ha! We’re dealing with something more crucial. And everyone is involved in helping hire the best talent. Even the CEO.

Image captured by Sharlyn Lauby at an airport in South Florida

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The Culture Series [Part 1] – Defining Diversity and Inclusion in Today’s Business Climate

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Diversity can have many definitions. Organizations often define it in the context of their culture. Generally speaking, diversity refers to the qualities, experiences, and work behaviors that make individuals unique. This includes age, gender, race, religion, ethnicity, disabilities, income, etc. It can also touch upon federal, state, and local equal employment opportunity laws, but…that’s for another post.

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If diversity deals with those aspects that make individuals unique, inclusion is the ability for organizations to make every person feel welcome, respected, supported, and valued. At this year’s WorkHuman Conference, I heard a quote from Verna Myers that explains it well, “Diversity is being invited to the party. Inclusion is being asked to dance.” So, inclusion is the extent to which the organization can realize a benefit of having such a workforce.

It’s very difficult to discuss diversity and inclusion in today’s business environment without including a conversation about culture. Culture is defined as a collection of commonly-held traditions, beliefs, and behaviors by a group of people. Culture is a part of every organization and, in many workplaces, it’s never documented.

Needless to say, every organization is diverse. Every business is made up of unique individuals. It’s true that we might share some common qualities and experiences with others, but not all. The real question is the organization’s ability to create an inclusive culture. For a company to achieve its business goals, they must recognize and leverage the talent within the company. That means being able to create a culture that is empowering, supportive, and in turn, allows people to do their best work.

Heather Brunner, CEO of WP Engine, said during the 2017 Great Place to Work Conference that organizations must embrace diversity and inclusion to achieve employee engagement. It’s only logical that engagement is contingent upon employees feeling involved and committed to their work as well as to the company mission and values. If organizations want to create an inclusionary workforce, there are three significant business opportunities to consider.

  • Innovation: The key to unleashing organizational creativity and innovation is by engaging employees who have a wide variety of skills and talents. For example, consider the five generations of employees currently in the workplace and their various points-of-view. A tremendous opportunity exists to create different ideas and expanded goals for the business.
  • Buying Power: According to the Selig Center for Economic Growth, the buying power of minority communities in the United States has greatly outpaced that of white consumers. For example, the Hispanic market is expanding rapidly and there are several untapped consumer segments such as the lesbian, gay, bisexual, and transgender (LGBTQ) market.
  • Sales and Profits: A study published in American Sociological Review indicated that companies reporting the highest levels of racial diversity brought in nearly 15 times more sales revenue on average than those with the lowest levels of racial diversity. The same study indicated that gender diversity accounted for a difference of approximately $500 million in sales revenue.

Lew Platt, former CEO of Hewlett Packard, summarized the business case for diversity best. “I see three main points to make the business case for diversity.

1) A talent shortage that requires us to seek out and use the full capabilities of all our employees.

2) The need to be like our customers, including the need to understand and communicate with them in terms that reflects their concerns. And,

3) Diverse teams produce better results.”

CEOs continue to say that recruiting and retaining talent is their number one priority. As the unemployment rate continues to drop, and we start to hear about “full employment”, companies are challenged to find skilled individuals to fill open positions. The proverbial “War for Talent” is back.

Successful organizations realize that their competitive advantage is having employees who are engaged with the company. Engagement happens when employees feel they’re included. When the company is operating at its best, employees are empowered to take care of customers and enabled to solve problems and remove obstacles.

Image captured by Sharlyn Lauby in the Wynwood Arts District of Miami, FL

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