GRAND RAPIDS — Let’s say a company is making a million-dollar capital investment, perhaps in a large piece of industrial equipment.
More than likely, a large amount of effort would be put into that process.
Executives might fly to various locations looking at different machines, they might examine cost and ROI, investigate the maintenance plan. Most likely, before such an investment is made, the company’s buyer would know that machine inside and out. And when it is installed, a comprehensive maintenance plan would be implemented along with it.
So why isn’t that same diligence applied to human capital?
“The mindset of the industry has to change,” said Fred Brown, president of Quantum Services Inc. “If you look at what you would do if you were going to buy a million dollar product vs. if you were to hire one employee for 30 years, if those are not too close you’re in trouble in the long term.”
Brown figured that it takes but one employee, on salary alone, to equate to a million dollar investment. An entry-level employee, even a factory worker out on the floor, might make $30,000 a year. If that employee is 25 years old at the time of hire, and he is employed until retirement at age 55, that employee has cost the company $900,000 before taxes and excluding benefits. And that doesn’t include any salary increases.
Like a capital investment, there is some concern that employees from time to time will “break down,” but unlike capital investments, employees may at any time choose to no longer work for that company at all.
On a similar scale, if a 200-worker plant paying wages between $25,000 and $30,000 has a turnover rate of 10 percent, the company will likely lose upwards of $250,000 in a given year.
“The calculations are fairly easy to make,” Brown said. “It’s just determining learning curve time. Not to mention the cost to interview him, or how many bad parts they might make the first two weeks. It’s just factoring in how long it takes them to get to average.”
For a firm with 20 engineers or similar mid-range professionals, there may be a learning curve of six months. At an annual salary of $50,000, that is a cost of $25,000 — and with taxes and benefits that number could double.
Predictive assessments factor in behavioral patterns into the interview process. While measuring an employee’s ability to work is often times difficult on its own, measuring the willingness to work is something that most companies find difficult.
Willingness to work, or motivational fit, is not just a factor of loyalty, either. An employee who is prepared to work 30 years for a company may end up working only two months. Further assessments within the interview process might reveal tendencies that will help prove if the applicant is the right fit for the job.
By red flagging certain responses, interviewers can determine how an employee will react to certain leadership styles and company cultures, an applicant’s desire and likely ability to be promoted — as well as how soon resentment will creep in if opportunities are slim — and how much an employee will like and be satisfied with that position or even that field.
“You can reduce learning curves by assessments,” Brown said. “You can reduce turnover and conflict and get to the people you should really hire.”
Some situations that might regularly slip past interviewers include hiring applicants who won’t fit into the company’s culture. Examples include the employee who works better alone but is placed in a close-knit team environment, or the applicant with 20 years of experience who actually hates the field but has been locked into it, or the displaced worker who has the experience but will jump to the first available position elsewhere.
“If that person fits what the job requires, or (the job) can be changed to fit the person, then your turnover is going to go down,” Brown said. “But if not, then you’re setting that person up for failure. It’s good for the person being interviewed, as well; you want to give them the best chance at success coming in the door.”
According to Brown, studies have proven that companies with interviewers who are properly trained in behavioral assessments have a retention rate that is 75 percent greater than companies that do not.
This type of questioning will also lend insight into an applicant’s qualifications. A salesperson, for instance, may have signed millions of dollars in new accounts, but his job may have consisted of only answering calls or the feat may actually have been achieved as a team, something that would not be revealed without a deeper line of questioning.