07/ 09/ 2007
by Pamela Mills-Senn
Here's the thing about turnover: It doesn't just cost you time and aggravation; it also costs you money. And the toll is probably much higher than you imagine, says Linda Leake, president of execUchange, a Raleigh, N.C.-based management consulting firm.
And for most small businesses, which typically lack a human resources department, this is an expense they're probably not monitoring, adds Leake, who has owed and sold three small businesses.
"I worked with one company that had about 250 employees, so they had an HR department and were able to track turnover costs, which were around $400,000 per year," Leake recalls.
Leake says the failure-of-fit of a key player could cost $35,000-to-$40,000, not farfetched when you factor in interviewing, hiring, training, and if the employee's insurance and other benefits have kicked in at the time he goes belly up.
So it makes sense to hire the right person for the position right from the start—easier said than accomplished as anyone will tell you. This is why so many large companies, in addition to background checks and perhaps drug screenings, also rely on selection/assessment tests to help them in the hiring process.
At one time, these tools may have been out of the financial reach of smaller companies, but that's not the case anymore, says Francie Dalton, president of Dalton Alliances, Inc., a management and HR consulting company located in Columbia, Md.
According to Dalton and others interviewed for this article, a variety of assessment tools are available to small-business owners, some that run as low as $150 per use.
That's what Rob Basso, owner of Advantage Payroll Services, a Long Island-based payroll services and HR data management company, discovered. The 10-year-old business with approximately 20 employees had been experiencing unacceptably high turnover, Basso explains. About three years ago, in an effort to turn this situation around, Basso decided to use an assessment tool to help his company determine the right applicant fit.
Prior to taking this approach, the company relied on the standard face-to-face interviews, but it just wasn't enough. They needed to find a way to determine if the fit was good or bad before the hire rather than after, which is what had been happening, Basso explains.
"We were finding that there was a large disparity between what people were telling us in the interviews and their actual skills," he said. "This assessment tool helps us determine if there's a match between what they're telling us and what the written test is showing us. Since we've been using this, we've noticed a dramatic decrease in turnover, and it makes sense; I can see the connection."
The company's entire screening process (which also includes a full criminal background check and drug testing) amounts to several hundred dollars per hire, Basso says. But compared to how expensive turnover is, he feels he's making out pretty good.
His experience isn't unique. Still, experts caution that you shouldn't count on assessment tools completely.
"They aren't fail-safe," Dalton says. "These provide just another data point, one piece of a comprehensive interview process."
Robert Drovdlic, director of the Global Consulting Partnership, a consulting company based in Wayne, Pa., agrees.
"There is a danger in relying on selection instrument data to make the decision," he says. "You have to look at the whole picture—the background, experience and the interview."
And before you can even begin to use an assessment/selection instrument effectively, you need to have the processes in place to support it, he continues.
"Who is in charge of hiring, and do they have training in hiring and interviewing? Drovdlic says. "Do you have adequate job descriptions, and do you have a general idea of the competencies (personality traits and skills) necessary to do the job? And then, as an additional layer of information, you can use selection instruments."
Leake of execUchange says that developing organizational charts will assist in the pre-hire screening process when combined with assessment tools. Think of a position you're trying to fill, she suggests. Identify the four or five main functions that make up this position and what the person would be responsible for. Then, identify what percent of the total picture each function represents and how much time the person would spend performing each function. Finally, determine if the functions are primarily people-oriented or task-oriented. Assessment tools can then help you determine which way the applicant leans—toward people or tasks—to assist you in hiring a better fit.
Finding the right assessment/selection tool for your purposes isn't terribly difficult. Basso asked colleagues and other larger businesses what they were using, whittled this list down to four or five and then did an Internet search. Along with price points, he looked for ease of use and how the results were presented (Basso wanted a data-rich summary, with multiple pages of data).
Additional qualities to consider include how the test is formatted, administered and scored, the variety of characteristics/behavior it will help you identify, whether the test validated, and how easy the results are to interpret and understand (Dalton suggests looking for those that are backed with an extensive narrative/description of the results. With this kind of tool, she explained, small-business owners don't need to be HR experts in order to make sense of the data.)
The test Basso uses allows him to hire to all his needs.
"We have about six different types of positions, and we use the same test for all, but just look for different traits," he said. "If we're looking for a customer service rep, for example, we want someone who is friendly and data-oriented and who thinks fast on their feet. If we are hiring for a sales position, we want someone who is goal-oriented and outgoing."
Although Basso tests applicants for all positions, you may find that for your purposes this won't be necessary, says Drovdlic of the Global Consulting Partnership. It could depend upon the level of the hire.
"If you're the CEO of a small company, and you're hiring a second-in-command from outside, it makes sense to [use selection tools] and even an outside consultant as part of the process, just as added insurance. With critical hires, the consequences of a miss-hire are greater. But you don't have to put everyone through the same process in terms of the resources you might use."
But for some small businesses, every hire might be considered critical.
"Take a moment and think," Dalton Alliances' Dalton says. "When a staff member is wrong for a small company, it's so much more devastating than it is for a larger one. And if you lose someone in a small company, the weight of what everyone else has to pick up is much heavier because there are fewer people to carry the load."
So, in today's hiring environment, is there any room left for gut feel? According to Drovdlic, the answer is "yes."
"Our phrase is ‘hire by design, not by chemistry,' but you need to have a balance," he says. "If you are interviewing for a real customer-oriented position, there has to be a good feel about the interview, but at the same time, you have to have the other data to support or deny that gut feel.
"There are people who are really good at managing an impression for a two-hour interview," Drovdlic adds. "That's how hiring mistakes happen."
