You spend too much on recruitment.

You spend too much on recruitment.
Posted by: Guy on 16/09/2005 18:08:29

Recruitment Issues Okay, so I don't actually want to discourage you from recruiting -- turkeys do not vote for Christmas -- but we have been doing some work on staff retention recently, and we were surprised. Surprised how much money you will spend on recruitment in the next 12 months, and how little on keeping those very expensive recruits.

There have been a number of studies over the years on the effects of high staff turnover. Most of them are commonsense, lower staff turnover leads to more satisfied customers, more efficient operations, better use of training, better recruitment. Most senior managers say they are interested in all of these, though rarely convincingly, but we do know that they are definitely interested in profit. With some caveats, lower staff turnover definitely leads to better profit.

We have looked at the motor industry, and while we compare relatively favourably with some other retail industries (some of the operators in the mobile phone industry have staff turnover levels well over 100%) things are far from perfect. Among the larger groups, for instance, most have staff turnover in excess of 25%, some as high as 45%. And yet the average for the retail motor industry as a whole is 18 to 20%, similar to the UK average.

Let me give you some figures -- we reckon that every single member of staff who leaves costs you £9,700, and we are being conservative.

I will not bore you with all the details, but once you are realistic you will come to similar conclusions. Just look at the raw recruitment costs (more than £5 in a newsagent's window for most positions), the management time, the lost productivity in the leaving employee's last month and in a new employee's first few months, as well as the cost of an empty chair for however long it takes to recruit.

But what do you spend on staff retention? How many manufacturers actually measure the rate of "churn" within their dealerships' workforces? How many groups analyse why they lose their top performers, the ones that generate them the most profit? And how much does the industry do to ensure that these precious individuals do not go elsewhere?

Because the future of this industry will eventually be in the hands of today’s new recruits. With ever greater levels of competition for our school and university leavers, not only are we not very good at attracting the right people, but once we have done so, we aren't very good at keeping them.

And why does a recruitment consultant worry about the very thing that earns him money? Because it also destroys his market. It means that clients move around too often, that new relationships have to be forged too often, that some companies who appear to offer good opportunities are actually dangerous to work for because life expectancy in the job is too short. And because it leeches away at the profitability of everyone in the business.

So I would love it if some of you stop spending quite so much on continually recruiting new people, and spent a little bit more money on retaining the good ones you already have. You never know, you might actually be able to offer them some decent career opportunities as well.

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