Money is crucial and a critical element in building and sustaining a business, especially small to medium sized companies that have limited access to funds and capital.
Every single dollar has to be earmarked to the area that will generate the greatest return or the simple survival of the business. There are choices of course: pay the rent, salaries, technology, accountant, legal fees, etc. Unlike other actions and decisions made in business, the spending of money is not always done deliberately. Sometimes it is the result of a bad decision making, action or behaviour, and it can have detrimental effects.
Consider the following challenge of a growing business. You have the need to increase your staff from 14-16 to meet immediate and long term customer needs. At the same time 1 key employee quits thus increasing your challenge to 3 new hires. You are still doing most of the hiring yourself, and you have little time post the positions, screen resumes, schedule interviews and make the offers. This is the reality of a small growing company. As usual, this has to get done and you re-prioritize and get to work. You get some ads out, and the resumes and job applications start to roll in. You review them at night, and you pick out the best candidates. In between other things, many other things, you interview the candidates, sharing with them your exciting vision for the future. You see 20 people over two weeks. You mean to check references, but you can’t get to it because your workload has been even worse since you have been spending so much time interviewing. But you are not terribly concerned, because job applicants tend to list their friends as references and no one is going to say anything bad anyway. You have learned that it is always a crap shoot and you just have to dive in and get the people hired. You hire the three people, mostly using your gut, and you are relieved to get back to “real” work. Within two months you realize that two of the three new hires are clearly not right for the job, and all signs point to hiring mistakes. You unhire them. You start the process all over again.
Do you ever wonder what this has really cost you?
There is the cost of hiring and training that you can look at in the hours you and others have invested in the process but the problem is that you are not going to get a bill for your hiring mistakes that would help you reflect on the true costs. Instead, the costs will be hidden in wasted time that could have gone into more productive things, and in customers who get bad product or service during this period. This will never appear on your balance sheet. You could argue it is the cost of doing business but in the end, money was wasted. What could it all add up to? It could easily be $40,000. It could easily be $200,000 if the person costs you a customer or two. Think about it: one call to a reference might have saved you $100,000.
How could you have approached this differently?
Hiring the right candidate takes time. Allocating time to the entire process is essential but still has no guarantees. One of the “cheats” is not checking references. Yes, candidates will provide you names and contact information of people who support them but validating them and going further to reference work experience with previous employers cannot be omitted. Spending 30min making a few calls and searching on-line can identify potential red flags before it’s too late. Reflect also on what you are not doing to grow your business while you are spending all this time on recruiting. Another approach is to partner with a trusted recruiter or head hunter. Providing them with clear guidance and criteria will empower them to post the role, search, screen, interview and reference check numerous qualified candidates. What they will provide you is a short list of the best suited candidates who have already been briefed on the organization, demonstrate a strategic fit and have been vetted on remuneration expectations. Additionally, most recruiters have guarantees that will ensure replacement of any candidate you does not pass the probation period. The costs of recruiters vary but you can expect to spend 10-30% of the hire’s first year salary.
Evaluate this cost and the guarantee versus the cost of your time of doing it yourself.