Waking Up to the Hard Costs of Crappy Talent Management
From where I sit, way too many companies are now dangerously smug in their belief that they have the cat-bird’s seat. The horrible economy of the past 18 months has translated into the misguided conclusion that employees are under the corporate thumb. Corporate math seems to add up something like this: a bad economy = no jobs = we can treat you any way we want = you will stay and work even harder than before = we will increase our revenue and profits.
Forget for a moment about the “soft” implications (the impact on individuals, families, communities, etc.). That is seriously flawed math. The result is (sooner or later) a bad business model that will spiral profits down, not up. That downward spiral will come from two things: a) having laid off workers during the bad times: and b) having created a work environment that your best workers will leave in the good times – if not before. The costs to the company are both deep and serious:
- Yes, money walks out the door, literally – in hiring costs, training cost, and productivity costs. I’ve seen the estimates range from as low as 25% of the average worker’s salary to 1-2x the salary and benefits of one exempt employee
- Loss of corporate knowledge and experience – the unique history and experience and relationships that employee took with him/her (within the company and more importantly, with customers and the community/marketplace)
- Increased customer dissatisfaction – even if you hire as good or a better replacement, at a minimum you create disruptions to customer service while the new hire gets up to speed and tries to recreate the credibility, trust and loyalty your key customers felt with your previous employee.
- Increased sales and marketing costs – to keep the now unhappy old customers or to find new ones to replace the ones lost. It takes 5-11 times more investment to develop new business than to expand existing business.
- Decreased retention of key talent AND increased cost and difficulty in hiring new talent:
- The pool of new talent is increasingly shrinking – the number of baby boomers who are/will be retiring is starting to outnumber the number of replacement talent (new hires) available. And you are not the only company out there wanting to hire them.
- Good talent takes other good talent with them – in this brave new world of social media (Linked In, Facebook, etc.) with ever increasing ease does your talent stay in touch with other talent. At one of my clients – a very large, high tech firm – a young high-potential talent jumped ship to a competitor. He stayed “friends” with many of his colleagues on Facebook. Six months later, three of his buddies had joined him.
- Your brand as an employer in the talent marketplace – it is so obvious that technology connects employees and customers 24/7. And yet so many companies still seem to think they fly under the radar like some kind of stealth bomber.
The fundamental question for any company to ask themselves is really this: Is your corporate talent strategy to find and retain top talent who can grow your business, now and in the future? Or to hire people who just need a job?
In the growing talent war for the best and brightest, who do you think will win?
