The Great American Payday Prepare for a (Relatively) Bumpy Ride.pdf
Hire or train
1. Question asked: "Hire someone new or train your own people?"
Business advisor William G. Bliss (inter alia Deutsche Bank, Thompson Reuters, Microsoft)
states several costs, employers are facing when entering the hiring process, for example costs
of advertisement, recruiters (internal cost of time), time costs of reviewing resumes, time costs
of conducting interviews, etc. Up to 400 times of the hourly salary can so become the (direct
and indirect) turnover costs. But wait, there's more. According to staffing.org companies spend
between $2.200 and $11.200 to hire a new employee.
Not only costs of the recruitment process are being faced, also costs for workplace integration
will come at the hiring business. Physical space, computers, cell phones, software,
equipment. As well as needed training for the job. And of course costs occurring due to the
limited possible productivity. According to Bliss, there are three periods with different levels
of productivity with new employees. The first month, the employee reaches a productivity level
of 25% which vice versa means a lack of 75% of productivity. Through week five to 12, the
productivity level raises to 50% and week 13 to 20 get him on a level of 75%. The "magic" five
months’ mark therefore is the turnover point, where employers can expect the new employee
to function at a 100% productivity level. Thus means though, that within the first months,
between 25% and 75% of the employee’s salary are business costs without beneficial effects. A
survey of 610 CEOs by Harvard Business School estimates the break-even-point for mid-level
managers is reached after 6.2 months. "The job of recruiting doesn’t end when someone signs
on the dotted line and comes to work for you," says Bill Catlette, management consultant and
author of Contented Cows give better milk.
And the training part? If buying the Swiss army knife is too expensive or isn't in stock, you
have to build your own. Create your own, what we Germans call "eierlegende Wollmilchsau"
(literally egg-laying-woll-milk-sow). Employees already in the company don't have to be
trained for the job nor need time to reach their full productivity level. They already reached it
and they know about internal processes and communication ways. Not only that, according to
Business News Daily, new research found out, that more than 50% of employees are interested
in pursuing further education and 30% would be very likely to use additional education services.
The World Economic Outlook, published by the International Monetary Fund reports that
organizations spent on average $1.208 per employee on training and development p.a.
Furthermore, learning hours of employees are as high as 31.5 hours a year. This gives us,
assuming 1.800 annual working hours (37,5hrs a week, 150 hrs a month), an unproductive level
of 1,75% compared to a new employee with 22,86%. This, to be fairly honest, ragged
calculation still gives an insight of a comparison between entering a hiring process or training
the own people.
Work with what you got or get a jack of all trades and form him for your needs. You can spend
13 times of the average employee development before reaching the unproductive level of a
newly hired person.
"Train people well enough so they can leave, treat them well enough so they don't want to" -
Sir Richard Benson
2. Sources and further information:
investopedia.com/financial-edge/0711/the-cost-of-hiring-a-new-employee.aspx
td.org/Publications/Magazines/TD/TD-Archive/2014/11/2014-State-of-the-Industry-Report-
Spending-on-Employee-Training-Remains-a-Priority
workforce.com/articles/theyre-hired-now-the-real-recruiting-begins
businessnewsdaily.com/4207-employee-education-perk.html
oecd.org
blissassociates.com
contentedcows.com