HUMAN RESOURCES

7 Ways to Cut Your Turnover Costs and Boost Morale

You're probably wasting your time and energy on recruitment. Here's how to hire right the first time.
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When you pay more attention to your raw materials than you do your talent, what you end up with is people who aren't as productive or happy as they should be and high and costly turnover. And nobody wants any of that.

Plus, notes Sue Marks, CEO of Pinstripe and Ochre House, a global talent acquisition and management firm, you're probably going about hiring all wrong, too. Up to 70 percent of recruitment is unnecessary, she claims. So what is necessary? Here are seven tips:

1. Hire higher. "A small business person and someone with 50 employees is going to say 'I don't make enough money now, how can I hire higher,'" says Marks. It's definitely a problem many small businesses face: Budgets are stretched thin, so they look for the cheapest employee that can do the job. But Marks says that is a shortsighted view. Instead, she says, look at your three- to five-year plan and figure out what you need, then hire that way. Perhaps you should hire eight employees instead of the 10 you wanted. Yes, fewer employees, but of a higher quality.

2. Understand your existing talent. Instead of running out and hiring someone new, do you already have those skills within your work force? Don't focus on cost but on employee value. In order to do this, you actually have to know your employees, and your HR department should be focused on identifying and developing talent within your existing work force.

3. Warm bodies aren't enough. You put in an applicant tracking system and say, "We hired X employees last year, and this year we'll need to hire Y employees." It's good to plan ahead, but ask yourself: Are these the right people? Take a bit longer to evaluate, and your turnover will be lower and your employees happier.

4. Use external recruiters that keep their promises. How does a recruiter build her business? Through adding new clients, and increasing the number of hires with current clients. The latter is a sign that a recruiter isn't completely focused on your business needs. Good recruiters should mean that your need for recruiters drops. "If we're doing our job, hiring goes down," says Marks. "We should, over time, see the number of hires go down given a constant business environment. Most of our competitors like screwed up companies because the more screwed up you are the more money you make." Avoid those recruiters.

5. Don't hire for who people are, but for who they can become. "We hire people for what they've done. And then six months later, we fire them for who they are," Marks says. Too much focus on the résumé and whether it meets your strict requirements means that you get someone who can do X, but may not meet your company's needs in the future.

6. Identify your current star employees. Marks always asks clients, "Who are your star employees, and what is it about them that make them such great employees at your company?" Once you've identified those people, note their characteristics, and use those characteristics as your guideline for your next hires. If you haven't identified what makes someone a star, how will you know enough to hire the next star?

7. Do your research. This goes along with identifying your star employees, but in addition, do you really know what you need? If you just have a vague idea that you have too much work and need someone else, you won't hire the right person. Additionally, just because someone quit, it doesn't mean that the best person is someone who can do exactly what the previous person did. Really think it out before you post that job vacancy.

If you do these things, you'll be able to cut your turnover costs considerably, and increase morale and productivity at your company, says Marks. It's absolutely worth your time to recruit properly in the first place.

Last updated: Mar 5, 2014

SUZANNE LUCAS | Columnist

Suzanne Lucas spent 10 years in corporate human resources, where she hired, fired, managed the numbers, and double-checked with the lawyers.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.



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