the roi of hiring right

The ROI of Hiring Right

Your workforce is your company’s most valuable asset — so hiring and retaining your company’s talent should be a top priority.

In the UK, the staff turnover rate ranges from 3.1-17.7% depending on industry,1 with an overall average of 15%.2 Identifying and understanding the underlying causes of your turnover rate will help you retain your star employees and, ultimately, save money for your business.

How much does turnover really cost?

The financial cost of replacing a salaried employee is the equivalent of 6 to 9 months’ pay — or even more if they worked in a senior role.3 Not to mention the considerable time cost of turnover — endless hours spent putting together job specifications, promoting open roles and assessing candidates.

In addition to these costs, high turnover damages your company reputation, disrupts team dynamics and lowers productivity.4

Why do employees leave?

The most common reason employees quit is because they dislike their manager. 5 If a worker can’t respect their manager, or feels mistreated in the relationship, they will become less committed.

Other reasons for employees leaving include:6

  • No opportunity to grow in their role
  • Feeling bored with work
  • Efforts going unappreciated
  • Feeling like they don’t fit in with the company
  • Not seeing how their job fits into the organisation’s work as a whole.

Finally, employees who feel underpaid may want to look for better pay elsewhere, but it’s worth noting that a high salary isn’t the biggest factor in satisfaction or motivation at work.7

How can you hire people who are more likely to stay?
1. Review your hiring process

Make sure your hiring process is thorough and standardised. Check that you’re hiring for good cultural fit along with technical skills and experience. A candidate who knows what will be expected of them and how your company operates will be less likely to become disillusioned and leave. Only 11% of new hires fail because they lack the right skills.8

2. Review candidate’s employment history

Frequent job changes suggest that they don’t, or won’t, stay loyal to their employer.9 This said, be mindful that some degree of job-hopping is now considered the new normal for some candidates — with almost 50% of new employees leaving within 18 months of their start date.10 Consider if job-hopping is a red flag for your company — will the investment you make in a new hire be returned?

3. Involve existing employees in the recruitment process

Ideally, get feedback from those who will be working with the new hire. Ask them whether the candidate would fit in with the team. The simplest way to do this is to give a candidate a tour of the workplace and introduce them to a few team members.

4. Offer a competitive benefits package

A high salary isn’t the biggest motivator for most employees, but they are more likely to stay loyal to your business if they think you are treating them well.11 Along with fair wages, you could think about offering other perks, like flexible working hours. Research typical benefits packages for your sector and find out what your competitors are offering their employees.

5. Provide opportunities for progression

Offer training that will give new hires the chance to climb the ladder and make this clear during the hiring process. Ask a candidate why they have chosen to apply for a position with the company. If they were drawn in by the promise of a structured career path, this is a good sign that they are looking to stick around and challenge themselves to grow with your business.

 

How to monitor your progress:

Tracking your turnover rate lets you tweak your strategy and check that you are hiring the right people.

the roi of hiring right

You can use these figures to set realistic goals for improvement. A 15% turnover rate is average across all sectors, but it shouldn’t necessarily be your goal. You’ll need to do some research on the average figures on your industry and set your targets accordingly.

Ask leavers for feedback:

Finally, invite all leavers to participate in an exit interview. Although they may not want to tell you precisely why they decided to move on, you might glean a few insights. If you see the same factors in your exit interviews and your company’s Glassdoor reviews, you’ll know what changes you need to make.

Employees might leave because their personal circumstances change, and there’s nothing you can do in those cases. However, the majority of turnover is preventable. By choosing the right person for a role and building a positive company culture, you can limit turnover and grow a happy, cohesive workforce.

Citations

1. Wortley, A. (2018). Employee Turnover Rates by Industry Comparison.
2. Booty, L. (2017). UK employees feel undervalued, and are the least loyal in Europe.
3. Accounts & Legal. (2019). Average Employee costs SMEs £12,000 to replace.
4. Moran, G. (2011). The Hidden Costs of Employee Turnover.
5. Heathfield, S.M. (2019). Top 10 Reasons Why Employees Quit Their Jobs.
6. Heathfield, S.M. (2019). Top 10 Reasons Why Employees Quit Their Jobs.
7. Personnel Today. (2018). News research says employee motivation levels are on the decline with 29% saying they aren’t motivated.
8. Arcement, B. (2018). The 5 reasons new hires fail.
9. Campbell, S. (2018). 4 Strategies for Recruiting and Retaining Successful Employees.
10. Mullineux, N. (2018). How Much Does Employee Turnover Cost Your Business?
11. Campbell, S. (2018). 4 Strategies for Recruiting and Retaining Successful Employees.