The Human Capital Challenge: How to Maximize Talent Resources for Better Business Results - Session 1


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The overall success of every organization depends on the employees doing the work. In companies of all sizes, talent management is at the top of owners’ and executive’s to-do lists – they see talent as a significant competitive asset, but report their frustration with long hiring processes and unpredictable outcomes.

This free three-part webinar series shows business owners and managers how to improve their hiring success fast. Most small and mid-sized companies focus time and resources on finding the “right” employees – the people they need to grow the business. But three out of four businesses report making at least one hiring mistake that cost thousands to fix.

Join Paula A. Soileau, CPA, Co-Founder and CEO at Affintus LLC, while she addresses the science behind hiring success.

The majority of business leaders believe employees can make – or break – the business. Participants in this series learn how to adjust their hiring systems to reduce the time and cost of hiring while identifying the candidates who really will make the best employee.

SESSION 1: The Value of Talent: Calculate your cost to hire and learn how to reduce it

Tuesday, December 4, 2012 11:00 AM – 12:00 PM CST

Figuring out how much you spend to hire someone is eye-opening. Most companies do not track this critical expense. In this session you will find a simple method for calculating cost-to-hire and then brainstorm ways to reduce the cost and time-to-hire.

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The Human Capital Challenge: How to Maximize Talent Resources for Better Business Results - Session 1

  1. 1. The Human Capital Challenge SeriesT he Value of Talent: Calculate your cost to hire andlearn how to reduce itDecember 4, 2012 | Paula A. Soileau, CPA ©2012 Affintus, LLC
  2. 2. Why does talent cost so much? Challenges  Finding the right candidate takes too long • Who will be successful is not easy to determine: how do managers know which candidates are best? • Internal processes may be inefficient • Social media results in lots of candidates  Employers settle for “good enough” • Difference between good and great employees is significant, but hard to know who will be great  People have biases • People like people who are like themselves, but this similarity does not reflect what is best for your job • People rely on subjective or self-reported information
  3. 3. Factors That Affect Hiring Cost  Turnover rate  Number of hires in a year  Time to hire / time positions vacant  Time to learn job  Hiring process (efficient vs. inefficient)  Average position salary
  4. 4. So which ones impact business results?  Turnover rate  Number of hires in a year  Time to learn job / ramp up  Time to hire / time positions vacant  Hiring process (efficient vs. inefficient)  Average salary
  5. 5. Cost To Hire…a simple calculation a) Number of Employees 2011 b) Estimated hiring in 2011 # of hires or placements c) Average hiring rate % =b/a d) Average Annual Salary $ e) Average cost per placement 25% % of salary f) Cost of Placements 2011 $ = (.25 X d) X b
  6. 6. Cost To HireImpacts Business Results a) Number of Employees 2011 100 b) Estimated placements in 2011 # of hires or placements 15 c) Average Turnover Rate 15% =b/a d) Average Annual Salary $ 50,000 e) Average cost per placement 25% % of salary f) Cost of Placements 2011 $187,500 = (.25 X d) X b
  7. 7. Cost by firm size ̈ Blatter, Marc et al. 2009. The Costs of Hiring Skilled Workers. Working Paper No. 15. Bern, Switzerland: Institut fur Strategie und Unternehmensökonomik.
  8. 8. Time To HireImpacts Business Results2 Formulas TF = RR – OD Time to acceptance TS = RR – SD Time to start  TF = Time until offer acceptance  TS = Time until new hire starts work  RR = Date requisition received  OD = Date offer accepted  SD = Date new hire starts
  9. 9. Cost to InterviewImpacts Business ResultsFormulaEstimated Cost to Interview = C*($M*Mhr) + ($R*Rhr)+$Trav C= total number of candidates interviewed $M = mean manager salary per hour Mhr = mean number of hours manager spends on interview-related activity per hire $R = mean recruiter salary per hour Rhr = mean number of hours recruiter spends on interview-related activity per hire $Trav - expenses per candidate: total travel, meals, hotelNote: if multiple employees are involved in interviewing, Mhr or Rhr in the formula should reflect the total number of hours all managers or employees spent on interview related activity.
  10. 10. Turnover RateImpacts Business ResultsFormula Turnover or Retention = (NSFY / AEFY) * 100 NSFY = Number of separations during the fiscal year AEFY = Average number of employees during the fiscal year(Measure company-wide, by department, and by manager )
  11. 11. Productive WorkforceImpacts Business ResultsFormula PW = HC – (%pNH)  PW = Productive Workforce  HC = Head Count  %pNH = New Hire Productivity Estimate
  12. 12. Human Capital Metrics Drive Business Results
  16. 16. Hiring is hard…
  17. 17. Better (and Faster) Hiring in 3 StepsClarify requirements and needs of the jobBe clear on what the job is and is not(don’t use a moving target or “figure it out later” approach)A Job Description is useful!Analyze top performersUse objective criteria firstReduce reliance on the resume - self-reported, subjectiveUnderstand limitations of resumes and interviewsLook for “natural” talents and abilities; skills can be taughtStructure interviewBehavioral questions – example of when candidate did XTake notes, rate responses on a scaleBonusHelp managers plan the entire talent decision processSchedule interview time at the beginning of the processUse human capital metrics to improve results
  18. 18. Better Hiring ImpactsBusiness Results 50% 50% 10% 10%
  19. 19. More from Affintus onImproving Business ResultsDec 11 The Limits of Experience and Education: learn why skipping the resume results in better hiring Early in their careers, most executives and managers learn that prior work experience and educational background are key factors in job success. But it turns out that it is not true! Neither experience nor education is related to future success on the job! In this session you will find out what factors you should look for in potential employees.Jan 8 The Value of Behavioral Interviews: learn how to interview to find out what you really need know as fast as possible You have probably read a lot about interviewing and how important it is to “get to know” the candidate face-to-face. The problem is that most interviews turn out to be a conversation rather than active fact-gathering. In this session, learn how to create the questions that really tell you what you need to know to make a good decision.
  20. 20. AffintusGreat people data. Great business | Paula A. Soileau, CPA | 1-866-429-4351 @affintus Visit Our Blog! ©2012 Affintus, LLC