Strategizing for Profitability: Are Your Employees Costing You Money or Making You Money? (Part 2 of 3)

This is the second article in a series of three articles about improving business profitability by implementing strategic measures for managing employees. Find out why structured employment practices make companies more profitable and what ingredients are required in the “recipe for success.”

The Single Most Effective HR Strategy for Increasing Profits

What percentage of employees in your organization do you consider to be successful? Keep in mind that a “successful” employee is someone who can meet all job objectives, especially those pertaining to productivity, quality of work, and customer relations. Any definition of success should also include employee loyalty and commitment to organizational values and goals.

If you think that less than 95% of your current work force is successful on the job, it’s likely that certain organizational issues are affecting your profitability. One of the biggest culprits contributing to lackluster performance among employees is the way in which people are hired. If your employees are not as effective as you would like them to be, then it makes sense to take a close look at your hiring process first.

The single most effective human resource strategy for increasing organizational profitability is to use structured employment procedures that markedly improve your chances of hiring individuals who are most likely to succeed. Reliable and valid selection techniques minimize the number of times you need to change your “now hiring” sign into a “now firing” sign.

BizTips

BizTip #1 – Overcome staffing nightmares by fighting back with state-of-the-art employment tools.

Considering all the staffing challenges today, it’s no wonder that most companies struggle in hiring people who can contribute positively to organizational profitability.

As the work ethic in our society continues to weaken, it becomes increasingly difficult to find individuals who are willing to be productive on the job day after day. In addition, fewer people are assuming responsibility for their decisions and actions in their work life. This widespread deterioration has chilling effects on employers, who are forced to address the consequences of low productivity, shoddy workmanship, tardiness, and employee theft.

Adding insult to injury, inadequacies in educational systems complicate matters tremendously for employers. Not only do vast numbers of people lack basic skills and abilities, but they also are ill-prepared to learn new skills required to deal with technological and organizational changes. Rapid changes occurring in the business world are translating into greater job expectations and an increased emphasis on employee productivity and quality of work to remain competitive.

Certain complexities in our society are making it more difficult for companies to combat the disruptive forces that stand in the way of hiring better employees. Fortunately, effective employment tools, such as job-related skills tests, personality tests, and structured job interviews, are available for fighting these obstacles to organizational profitability.

BizTip #2 – Get the job done right by using the “smart body” approach to hiring.

Although this may overly simplify matters, organizations basically choose one of the following approaches for hiring employees:

• “Warm body” approach. Companies using this approach, which is quantity-oriented, simply want to fill job openings as quickly as possible. Since expediency is valued more than anything else, minimal time and money are spent evaluating applicants’ suitability for jobs.
• “Smart body” approach. Companies using this approach, which is quality-oriented, are interested in identifying individuals who will be able to meet all job expectations. Since the ultimate outcomes of the employment process are valued most, enough time and money are spent to assess applicants in appropriate ways.

All employment decisions essentially boil down to making predictions about how well people will perform their jobs. The “warm body” approach tends to be no better than random selection, which is like tossing a coin and betting against the odds that you will get good results. The “smart body” approach involves using sound assessment techniques for identifying top performers and eliminating future costs associated with hiring poor performers.

Many employers use the “warm body” approach because they believe the “smart body” approach is too time-consuming and expensive. They simply put little or no effort into the employment process, make uninformed hiring decisions, and then hope for the best. What these employers often overlook, however, is that they have to spend much more time and money in the long run because they usually end up with unproductive employees who are fired or who leave shortly after being hired. And the whole employment process must be repeated until they are lucky enough to eventually find people who can do the job.

Organizations that use the “smart body” approach to hiring decide to spend more time and money up-front where it really counts. They know that using appropriate employment tools and procedures will significantly increase their chances of finding employees who will make a long term contribution to the profitability and health of the company. When all is said and done, these companies actually reduce costs and make more money because their employees are more successful and remain on the job for a longer period of time.

You invest each time you say “you’re hired.” Do you know what kind of human resources investment you are making each time you hire an employee in your company? A free Human Resource Investment Calculator will give you a general idea of how much money is at stake whenever you hire someone.

BizTip #3 – Use “job-related” assessments to get the biggest bang for your buck.

Employment tests should be relevant and be based on a thorough analysis of the job. Sometimes, however, organizations use employment tools and procedures that are not suitable for identifying applicants who will make the best employees. For example, a personality test specifically designed for clinical evaluation purposes might be used to hire managers. Or a skills test developed for selecting computer technicians might be used to hire clerical personnel.

The most important thing to remember is to use employment tests that are designed to measure the types of knowledge, skills, and traits needed for successful job performance. If you select assessments simply because they are popular or have been around for a long time, you are probably not using the best yardsticks for making employment decisions.

Companies often overlook the primary objective for using job-related assessment techniques in the employment process. Structured selection tools, which can minimize the risks of making random hiring decisions, can pay big dividends in terms of increased employee productivity, quality of work, and organizational commitment.

The main advantages of implementing well-designed, job-related assessment tools in a company are as follows:

• To save money. Predictive techniques increase the probability of selecting successful people and rejecting individuals who are most likely to increase your operating costs.
• To enhance efficiency. By using job-related assessment devices, you can quickly obtain more of the type of information you need for making good hiring decisions.
• To minimize future problems. If you select individuals who are both competent and motivated, they are more likely to be satisfied with their job and to stay longer with your company.
• To improve legal defensibility. Structured, job-related assessment procedures make it easier to defend your hiring decisions.

BizTip #4 – Make sure that your employment tools and procedures meet all of your organizational needs.

The following characteristics pertaining to assessments should be part of any hiring process:

• Valid. Assessments should be supported by empirical studies proving that the selection devices predict successful job performance.
• Comprehensive. Assessments should comprehensively measure the important skills, abilities, and traits required for job success.
• Efficient. Assessments should be easy to administer and score.
• Cost-effective. Assessments should be affordable and should offer an inexpensive way to safeguard an organization’s investment in human resources.
• Contemporary. Assessments should not be outdated and should relate to the needs of today’s businesses.

Hire Strategically

Are your hiring decisions making your organization money or making your organization lose money?

All too often, the time invested in selecting people is wasted because the approach is haphazard and relies too heavily on chance. Research has shown that a structured assessment system can help organizations spend time more effectively “up front” where it really counts. The time you spend making more informed employment decisions will pay off in greater productivity, less costly training, lower turnover, and fewer problems with employees.

The appropriate assessment tools and procedures should be incorporated in a company’s business strategy for improving profitability. Just as better equipment and computer systems can help an organization maintain its competitive edge, structured approaches for selecting successful employees can help build a work force that will not only yield immediate dividends, but will also contribute to a company’s long-term profitability.