Good Hiring Practices

Benefits of Good Selection Practices

The long held ‘rule of the thumb’ figure for the ‘cash’ cost of replacing an unsatisfactory employee is around 1.5 times the salary. This is a conservative estimate - its often is much more, especially when the ‘intangible and indirect’ costs are considered, or if the role of pivotal for the organisation, or when it is difficult to find a replacement.

One mishire can cost a company 14 times the salary of a manager making less than $100,000 a year, and up to 28 times the salary of someone making $100,000 to $250,000 a year, according to Smart’s 1999 book, Topgrading: How Leading Companies Win by Hiring, Coaching and Keeping the Best People, based on 4,000 interviews with people at public and private companies. By that estimation, firing a single ineffective top manager making $200,000 a year could cost a company roughly $5.6 million. "It could be even more than that," says Holst, "if you hire someone like a sales manager who alienates all your customers and then leaves after six months. That [cost] is hard to measure, but it’s huge."

Workforce Management, May 2004, pp. 70-72
Screening Out Bad High-level Hires
By Michelle V. Rafter

A good (accurate) selection system will, in contrast, have many positive effects:

• Generate support for the process from both successful and unsuccessful candidates
• External clients and candidates will both have a more positive impression of your organisation
• The best recruits can be up to 5 times as productive as the worst
• More capable people move more quickly to their optimal levels of performance in new roles
• High performers often ‘self develop’ and need less training
• Excellent employees contribute more and better ideas that improve profitability
• Capable staff need less attention from management
• Excellent people help inspire, develop and help retain other staff
• High performers provide superior customer service, thereby generating higher customer satisfaction
• Better staff have a better retention rate