If you view your company as a system and the fundamental functions as sub-systems, each subsystem then play’s a crucial role in the overall operation of your business. Systems essentially take input, process them to produce outputs. Other than the processes, any system is dependent on the quality of the inputs of the system.
Your HR function is no different. The “raw materials” of your HR system are people and like any other system, the product (output) is dependent on the processes and the raw materials you put into the system.
But many time small to medium sized business owner and managers become frustrated because they can’t seem to find quality people, so they make the assumption that no one wants to work or that everyone in the workforce is only looking to get a paycheck and has no interest in benefiting their company. Neither of these assumptions are correct. There are quality applicants in the workforce, you just have to find them; and you don’t necessarily have to pay premium wages to get them either.
According to the U.S. Department of Labor, the price of a bad hire is at least 30 percent of the employee’s first-year earnings. A career builder study found a significant 24% of companies reported that a bad hiring decision had cost them well over $50,000, with an even larger 41% of businesses reporting a figure of over $25,000.
While the financial impact is quantifiable, a survey of chief financial officers actually ranked a bad hire’s morale and productivity impacts ahead of monetary losses according to Forbes magazine. One study found that 80% of employee turnover is due to bad hiring decisions. With these types of statistics, can you really afford to make a bad hire?
What causes bad hires? Most of the time, its hiring in desperation. Hiring in desperation may be caused by a number of things – not knowing how to source applicants, lack of an effective hiring process, inadequate pool of candidates, poor interviewing techniques, and other issues. But the result is usually the same – poor hiring.
Step to improving you HR input
- Increasing your flow of applicants – the greater the number of applicants, the more selective you can be.
- Be clear about what you want – make sure you know what the job requires and what you expect of the applicants.
- Don’t compromise – beware of a “they’ll do” standard. If you know what you’re looking for in an applicant, they stick to what you want.
- Be selective – choose the best of the pool. If you’re not happy with what you get, keep recruiting.
There may be some pain at first until you get your arms around your hiring process but stick with it until you start seeing a better quality of employee in your business.
You’re probably thinking, all that sounds well and good, but I need people now – I’m desperate. Remember what I said earlier? The key is not to become desperate. Look, there are instances when you are surprised by a resignation or a termination, but by in large you should have a pretty good idea of your turnover and when you are going to need people. If you don’t, start tracking it. This will help you begin to understand what your hiring needs are going to be, and subsequently what and when you need to hire.
Like most businesses, the marine industry is cyclical. You have busy periods and periods of business slow down. Based on this pattern you can start to get a feel for your periods of demands for manpower and attrition. As you begin to understand the trends, you are better able to predict workforce demands.
For example, a key business pattern in the towing industry is the seasonal shut down of rivers. Generally, these seasonal occurrences affect traffic on other river segments as well, so business tends to slow down. This mean fewer boats operating and subsequently, less of a demand for workers.
Conversely, during peak seasons of operation, demand for workers will be higher, so you should try to recruit when workforce demands are lower, if possible.
A relevant perspective on the workforce is if you don’t treat your employees well, there’s an employer out there that will. With unemployment reaching is lowest levels in 50 years, many small to medium sized businesses are struggling because they don’t feel they have the resources to attract quality applicants. It’s pretty much a job seeker’s market right now. EVERYONE is hiring. In addition, job openings are occurring even faster than people are entering the workforce or quitting current jobs. Consequently, if you can’t hang on to the good employees you have, it’s going to be pretty difficult to find a quality replacement for them.
In a competitive market, companies can either choose to compete through pricing or product differentiation. In the consumer market, the cost option means lower prices than the competitors. In an employment market, it means higher wages, or better benefits. For some small to medium sized companies, higher wages or a great benefit package is not an option. Consequently, the only other option is differentiation.
Because wage increase can be a risky move or unsustainable in the long-term, differentiation is often a better choice for smaller companies. With differentiation companies must define their employment brand. This can include benefits like job stability, promotional opportunities, and other intangibles, but also returns such as a positive corporate culture and work/life balance.
It’s not always about the money. Flexible work schedules, vacation days, work environment, sick days, employee treatment, and other benefits and perks can enable even very small businesses to attract quality applicants and keep solid employees.
Finding and keeping good employees into today’s job market is critical if you are going to maintain and grow your business. Like any other system, your product or service is only as good as the raw materials you put into the process, so finding the best people is a key part of your business output. While wages are important, they are not the sole factor in the decision to come to work for your company.
If you need help in developing an attractive compensation package that will be within your budget, give us a call at (270) 709-3135. We’d be glad to help.