Employment karma can come back to haunt

01 January, 2017

Small, sound investments are your best asset and will reap rewards in the long run

Every action you take as an employer or HR professional has a ripple effect on your employees—even the tiniest, most insignificant action may end up being the deciding factor in a valuable employee’s decision to stay or go.

It’s called ‘employment karma’ and executive recruitment specialist James Fairbairn says it’s the key to maintaining a competitive advantage in a tough business environment.

“The more things you do right, on the whole, the longer you will retain employees and the more return on investment they’ll bring your organisation,” he says.

Fairbairn, a partner at Lester Blades, says organisations that view their people as a cost rather than an asset, even when economic conditions are tight, are missing the much bigger picture: how much it costs to mismanage and lose people.

“The single most important asset an organisation has is not its equipment, or its assets, or its R&D—it is its people,” Fairbairn says. “Organisations that both recruit the best possible employees (within their means) and, most importantly, retain those employees will be more successful than those that do not.

“Unfortunately most organisations see the employment of people as a profit and loss return-cost. In reality, employment is productivity return-cost to a business, with the apparent profit and loss cost—the cost of recruitment and their salaries—just being the proverbial tip of the iceberg.”

Fairbairn says the real cost is “hidden below the water” and reflects;

  • the man-hours of someone not doing their day job to recruit and train a new staff member (circa 100 man-hours per white collar hire)
  • the proportion of new hires who don't make it to 18 months’ service (as it takes around 18 months for them to get up to speed and to have paid off that initial investment)
  • the increased risk of losing an existing staff member for every wrong hire you bring into the company (as everyone remaining has to work harder to plug the gap and could well be thinking, ‘what were they doing employing that idiot?’)

A new way to look at your people

So how can businesses improve this productivity return?

Firstly, says Fairbairn, have more efficient recruitment and induction processes and secondly, make fewer mistakes when hiring so that more new hires make it to 18 months’ service and beyond.

“In the recent boom, 35 per cent of new white-collar hires on average in Perth never made it to 18 months’ service,” he says. “In other words, around 35 per cent of new hires were costing their business more money to employ than they ever made in return.

“Ultimately there is nothing more expensive to a business than a bad hire. At present many businesses are forgetting this productivity return of employees and are squandering the huge investment they have already made.

“They wrongly believe that just because they have low staff turnover at present, they can reduce their investment in retention strategies for their existing employees and cut corners with the recruitment of new employees.

“In reality, however, they are simply storing up a whole world of hurt for later. When the employment market inevitably picks up, the resulting stampede for the door will demonstrate what a false economy that short-term thinking was.”

Don't let employment karma come back to bite you – set yourself and your business up for success from the start. Purchase CCI's Guide to Recruitment and Termination today.