Rumor Alert!
On Sat, 12 Jun 1999 John Sullivan <
johns@SFSU.EDU> wrote Re: Employer of
Choice- Value of employees
>
>Jack is right (he always is).>
Thank you, John, for the vote of confidence but List participants are
hereby warned that this is an overstatement. I have been known to be wrong
-- in thought, -- in assertion -- and particularly in keyboard (especially
without spell-czecher). ;-)
On Sat, 12 Jun 1999 Edryce Reynolds <
edryce@JUNO.COM> wrote Re: Employer of
Choice
>Where did you get the numbers here? I'd like the reference details. Do
>they vary by industry? How about education?
I got the numbers from calculating them for clients who were interested in
understanding the Competency Development process and dynamics of their
businesses. I have seen several articles and papers on the subject, as
well, although I do not have any citations handy.
Try your own:
Select a job opening and note the compensation. Make that X. Then add 40%
of X for induction costs (headhunter and interviewing expenses or
advertising or bounty or whatever you use to get a new hire in the door).
Optionally, add relocation expenses which can run from near zero to over
$20K. Then note that the cost to the employer is about 2 times
compensation (for office, utilities, benefits, etc.) So take this 2X and
add 50% of 2X/12, plus 30% of 2X/12, plus 10% of 2X/12 all of which
represents the non-productive costs during the "break-in period" for the
new employee. This means that during the first month (s)he will be half
effective, and only 70% effective the second month and only 90% the third
month. If you really want to be realistic, double those three adds because
while the new hire is only being 50% effective (s)he is also taking up a
lot of time of his/her peers and their lost productivity should be charged
to New Hire.
So now you have a rough idea of what it costs you per new hire. Yes it
varies by compensation level, education, prior experience in the specific
role and the interpersonal skills and learning style of the new hire. The
latter can make the "breakin numbers" worse. Conversely, hardly anyone
hits the ground running and if the new hire is in Market planning or
strategy or similar then the "break-in" period can be 6 to 8 months.
In the case of having to undo a bum decision (or a unilateral change in the
new hire's psyche), you should recognize not only the incoming cost for the
next replacement but also the "lost investment" incurred by the person
leaving and the disruption of workgroup productivity of the "death in the
family" (10% of the whole worgroup productivity for one month) plus the
disruption until the replacement is found and hired.
Note that all of this only deals with the costs of the persons and does not
recognize the leverage of the person's performance on the business. An
example of the latter is John's mention of a project manager who cost the
company $29 Million due to poor performance. Those kinds of losses are a
whole second story which amplifies the importance of knowing how to find,
attract, entrain and keep good people.
Now, to really get into trouble on this List, note that Drucker says that
productivity is one measure of the business but innovation (rate of) is
another. It seems to me that the education field is not so much sensitive
to productivity as to innovation. That is, one should calculate the cost
of tenure or whatever causes the class materials to be 5 to 15 years behind
reality.
--- closing the hatch and submerging to safe depth >>>>
Jack Ring, 32712 N. 70th St., Snottsdale, AZ 85262-7143
480-488-4615, Fax)480-488-4616, Cell) 602.369.4615
Work like you don't need the money.
Love like you've never been hurt.
Dance like nobody's watching.