1. How much more do good performers deliver compared to the average?
Studies of performance differences in jobs found that it varies according to the type of job. In relatively straightforward jobs, (such as cleaners or machine operators) good workers produce about 20% more than their average colleagues, whereas with more complex, professional jobs the difference is more like 50%, and in sales jobs it is often more than twice as much.
In many business areas, the financial value people add is a result of the leverage they can affect on capital employed. In these businesses, the differences between average and good performers tend to be very large (100%+) and the best or worst performers can make or break companies.
2. What is the full cost of employing someone?
Normally between two and four times basic salary. One of the high (but often hidden) costs is office accommodation – particularly in city centres. Other costs include management and corporate / administration costs as well directly attributable costs such as fringe benefits, computer systems, training etc.
3. How much does labour turnover cost?
All of these added together. As a rule of thumb, the cost of replacing someone is usually equivalent to their annual full cost of employment (2. above).
4. When are people most likely to leave?
The most vulnerable time is at the ‘induction crisis’ (3-6months in) and during the first year. After about 2 years people are often looking for a promotion, or at least a change. Boredom can set in after 5 years in a job – at this stage the organisation needs to start demonstrating long term commitment.
5. How do you find good people?
Each of these methods has its merits and its place. Referrals from good current employees often have the best ‘hit rate’ – 3:1; (i.e. one good, suitably qualified candidate for every 3 suggested). Good recruitment advertising can deliver about 12:1, and is often an effective approach. For some jobs, e.g. airline cabin crew, unsolicited applications can provide a steady source of good applicants.
Sources include:
- Costing Human Resources – Wayne Cascio 1999
- Calculating Human Resource Costs & Benefits – Lyle M. Spencer 1986
- The ROI of Human Capital – Jac Fitz Enz 2000
- TOPL studies
- Income Data Services