Dexter Davies Smith is Business Development Associate at Synermetric and is currently completing his MSc in Business Psychology. Dexter says, ‘I am driven by my passion for psychology, with particular focus on behaviour within systems. I appreciate collaborating with Synermetric as they are a progressive company that focus on taking psychological principles and applying them to create genuinely reliable and useful tools for business'.
Part 1 in our illuminating Re-thinking Recruitment series.
Recruitment is a fundamental part of business and, in today’s climate, is considered to be more important than ever. The value of human capital has put new emphasis on the importance of attracting and employing the right staff. The methods of identifying key talent vary wildly, from conventional methods such as application forms & CVs, through to over-elaborate 10 week televised interviews at the mercy of Lord Sugar.
What many people might not be aware of is that academic research provides clear insights as to which recruitment processes best predict future performance for potential employees, and these techniques are very often cost effective and easy to administer. Yet these insights have fallen on deaf ears – so much so that reasons for the gap between research and practice concerning personnel selection have become research questions of their own.
Considering this, Synermetric is publishing a practitioner’s guide to recruitment written from an academic perspective. In this guide you’ll find:
- An argument for the value of good recruitment and a demonstration of the cost of getting it wrong. This business case aims to show why it is critical companies make investing in recruitment a priority.
- A good look under Occupational Psychology’s bonnet to learn some key principles for assessing recruitment methods. We also delve into human biases that can affect and undermine solid recruitment processes.
- An examination of different selection methods from a practical and academic viewpoint, looking for strengths and weaknesses.
We aim to leave you feeling more informed and empowered by demonstrating that recruitment isn’t a lottery and that implementing a reliable and successful process can be easy, efficient and cost effective.
So, with all that in mind, imagine if your colleague upped and left tomorrow, how would your company handle the recruitment process? We begin our examination of recruitment by making a business case that it is essential companies make recruitment a priority. A good starting point is to explore all the avenues in which hires can financially affect the company, whether it be positively or negatively.
The True Value of Recruitment & the Cost of Getting It Wrong
Business is changing at a faster rate than ever before. The western world has shifted from production industries to service industries, and with that change, we have seen the importance of staff contribution rise and rise. In modern industry, the cost of hiring the wrong person against the benefit of hiring the right person can be astronomical. If you thought the money spent on football players was excessive, pick up a copy of Wired magazine this month and see that Google have just spent 3.2 billion – yes, billion – to acquire the man hailed as one of the godfathers of the iPod.
“But that’s Google, what they spend on a head-honcho and what we invest on graduate recruitment or middle management can’t be comparable?”
Well, why not?
Whilst the figures may be drastically different, the principle remains the same, Google are willing to invest in their recruitment to get the best staff, because they know having the best staff is a competitive advantage.
It is not uncommon to hear companies object that they can’t afford to put extra resources into recruitment, and quite often that is as much about time as it is about money. But, if we stop and think, it is possibly the most dangerous area to cut corners and take the short-sighted approach. Let’s have a look at what happens when companies can’t afford to invest in recruitment…
Hiring a member of staff that goes on to under-perform
If you’d like to add figures relevant to your company and sector to this, please do so, but the main aim here is to appreciate the true costs involved in the life-cycle of an employee who under performs compared to the up-front investment of better selection processes. This comprises of many factors including:
- Initial costs of the hiring process first time round. This includes the time of your people involved with this process, any expenses for external assistance, cost of any tools used. This is commonly misconstrued as the entire cost of recruitment.
- The Bureau of Labor Statistics in the US reported that average job tenancy is now 4 to 5 years, so let’s add in 4 or 5 years wages. Feel free to add any additional costs like Class 1 contributions at this stage.
- Beyond wages, you have the cost for training this member of staff. We looked in a previous post that well in excess of £100 billion is spent per year on training. Include money spent on external training and the valuable time of internal staff training this employee and the figure soon racks up.
- Return on investment costs – by hiring the under-performing member of staff we not only incur the cost of missed opportunities, mistakes, and disruption caused against the baseline of performing as expected, but miss out on all the increased profit from an over-achieving individual. As you can imagine, this swing can be huge.
- Severance costs, if it gets to that point. This includes direct financial implications, the lost time of important members of staff to go through the process, and also the disruptive effect this has on the team.
- We are then back at stage one, needing to recruit again. In fact, 75% of all recruitment demand is to fill positions left empty through loss of staff.
So the true cost of recruitment is far from the initial step of getting the position filled. In fact, that is likely to be the smallest cost – it’s very much like purchasing a mobile phone on contract, you can get a great deal on the cost of the hand-set, but what you find is you end up paying far more in the long run – and at least with the phone, you’re guaranteed to get one that works!!
Hopefully, that puts into context why recruitment needs to be taken seriously and why the cost of getting recruitment right first time is minimal compared to the cost of getting it wrong and having to repeat the process, or being stuck with an under-performing member of staff.
The next significant point to realise is that:
Taking recruitment seriously does not mean it needs to be an expensive, laborious and time consuming process.
The objective of recruitment is to identify the candidate that is most likely to perform the best as an employee. Lots of research has gone into the different ways of identifying this candidate, from a simple unplanned one to one interview through to intense assessment centres where participants are put through, what is at least presented as, a rigorous scientific examination of their potential. Over the coming blog pieces, Synermetric will present an overview of different selection methods, review the scientific research supporting how useful these methods are and hopefully shed light on an often murky area for practitioners.
Watch out for part two of Re-thinking Recruitment, which will cover the psychological approach to recruitment