The Pros and Cons of Promoting From Within vs External Hiring

 

A hiring process can be a daunting time for businesses. For whatever reason an employee vacated their position, it now lays unclaimed, and while the company efforts to fill it, money is lost. There are two options for filling an open position: hiring from within, and hiring externally. There are many factors to take into consideration before committing to one option or the other. Many of the benefits associated with hiring from within a company are tied to employee morale.

 

Employee Morale

 

Hiring internally is quicker because the candidate is already an employee with the company, and are therefore already familiar with operations and business methods. The training process will be quicker, and the transition will generally be smoother than bringing on a new employee. Hiring from within sends a message to other employees that there are real career opportunities with the company. Often, this boosts company-wide productivity, as it creates added incentive for increased productivity.

 

Trust

 

Companies like to hire from within because the candidate for the position is a known commodity; someone whom the company is already familiar with. They know the person’s strengths and weaknesses, and the candidate has already established relationships with employees in the company. The costs associated with hiring a new employee are also lower, meaning advertisements and time spent working with an unfilled position won’t accumulate, because of the speed of a quick hire.

 

New Outlook

 

Conversely, hiring a candidate externally introduces a fresh perspective to the fold. Bringing experience from outside the company can be a breath of fresh air, particularly in a struggling business. Hiring an external candidate means access to a larger, more diverse talent pool. Often times, the company only has one or two qualified candidates for an open position, hamstringing them into choosing between two under qualified candidates. Hiring externally gives a company a chance for a fresh start

 

While hiring a known commodity may appeal to many, it comes with its potential disadvantages as well.

 

‘Thinking Within the Box’ Syndrome

 

Hiring an existing employee for a position with more responsibilities can lead to a narrowing of ideas; more of the same. A struggling business that hires from within is less likely to receive the proverbial “shot-in-the-arm” of innovative concepts and ideas that comes with hiring someone outside of the company.

 

Jealousy

 

Even though there will be less training and need for orientation for an internal candidate, they will have to adjust to new expectations and responsibilities, just like an external candidate would. Internal politics also play a hand, as some fellow employees may not agree with the promotion, creating tension in the office, and hurting overall output.

 

Relying on the Unknown

 

When hiring an external candidate, all a company has to judge them is a resume, the interview, and perhaps some examples of work, depending on the type of position. This puts the hiring company at a disadvantage, known commodity also applying for the position.

 

Organizing a search for external candidate means spending money on advertising for the position, and means that the position is open for a longer period of time, draining the company of additional funds, and diminishing productivity. A person hired from the outside will take time to not only train, but to become familiar with other employees, and their respective strengths and weaknesses.

 

Unhappy Workers

 

Announcing to a group of employees that the position has been filled externally can hurt morale just as much as the news of a hiring from within can help it. Knowing that all of their hard work will lead nowhere except a paycheck hurts effectiveness, costing the company money in the long-term, as right now.

 

Weighing the pros and the cons for hiring internally, or externally, comes down to what the company is looking for. Is it looking for a fresh perspective for the position, or is it looking for stability, and a smooth transition? It’s an easy question to ask, but not nearly as easy to answer.

 

About the Guest Author:

Hilary Smith

Hilary L. Smith is a small business entrepreneur who enjoys topics involving mass communications, technology development and international relations.

What your company needs to know about “gaming” your way up the corporate ladder

Gamification is one of the hottest topics in HR technology today. As explained by Gamification Co, gamification brings together game mechanics and marketing to create engagement and solve problems. By incorporating a company’s operations with elements such as achievements, badges, and levels, gamification increases both user engagement and a sense of loyalty among a community.

 

What is gamification?

Gamification is the application of game mechanics to workplace problems and employee engagement. According to analyst Jason Averbook, “the theory is that by applying the same principles that inspire people to play games – achievements, status, and rewards – to employee performance, businesses can drive deeper engagement, and increase alignment with corporate goals“. Engaging employees with tasks that resemble a game could potentially increase their immersion in their work, promising significant increases to productivity and retention.

 

Why does gamification work?

According to online blogger Robert Scott, gamification appeals to the natural human needs to achieve, compete, be recognized, and be entertained. By converting tasks into a game, gamification converts a user’s logical decisions (“I work because of my paycheck”) into emotional decisions (“I work because I want to succeed”). As a result, implementing game mechanics such as achievements and badges fuels an individual’s drive to succeed, creating an immersion unmatched by other resources.

 

How can I gamify my company?

Andrew Butow suggests that for gamification to be successfully integrated to HR practices, several factors need to be considered, such as:

  • people interact with the tool frequently
  • there exists a community that people care about recognition in
  • interaction points are easily quantified
  • adoption is a high priority

Gamification mechanics in HR include badges or achievement levels as rewards for significant workplace accomplishments or contributions. Quizzes, points, or leaderboards could also be used to stimulate competition among employees, increasing engagement and participation among employees.

 

As Josh Braaten, an Online Marketing Manager at Rasmussen College, puts it, “while games were once solely played for pleasure, game and simulation applications are now used widely within companies as a tool for organizational development.” Gamification is a rapidly growing field, with GSummit, a convention discussing gamification techniques and practices, attracting companies such as Microsoft, NBC, and United. Other businesses such as Rypple, Badgeville, PeopleFluent, and Sharepoint have focused on implementing gamification mechanics into the traditional HR practices of performance reviews and workplace wellness. By gamifying its HR technologies, a company can ultimately increase its productivity and workplace participation. How can you gamify your business to improve performance and employee interaction?

 

– Article Courtesy of Jumpstart:HR HR Technology Intern Olivier Jin

 

The True Cost of Employee Turnover

It is estimated that the cost of employee turnover can range from 40-400% of an employee’s annual salary. The total cost of turnover includes money, time and other hidden or “soft” costs, which when combined, are often much more substantial than expected. This post details the various components of the true cost of turnover, along with suggestions for keeping this large, elusive cost under control.

“Hard” Costs of Turnover

  • Administration costs for leavers: exit interviews, payroll changes, etc.
  • Covering a vacancy with temp-workers or overtime.
  • Recruitment and selection costs: advertising the vacancy, reviewing applications, conducting interviews, etc.
  • On-boarding new hires: induction, training, etc.
  • Severance pay.
“Be cautious when you consider terminating an employee. If you aren’t, you could be writing and indefinite blank check and cashing it can be exponentially costly.” – Joey V. Price, CEO of Jumpstart:HR

 

“Soft” Costs of Turnover

  • Lost expertise.
  • Missed deadlines and disruptions to workflow.
  • Increased absenteeism due to stress.
  • Decreased productivity or customer service.
  • Reduced morale, which may cause remaining employees to express a desire to leave the organization.

 

The Cost of Turnover Often Goes Unrecognized

Unfortunately, many companies do not recognize the cost of turnover as a major problem. One survey found that less than half of organizations have a process in place to properly calculate turnover costs. Another issue is that the cost of turnover is often underestimated and deemed to be an “unavoidable” cost of doing business.

It is true that some degree of turnover is inevitable, and may even be advantageous: the goal should be to retain top talent while replacing low performers. Managers who are conscious of the rate and cost of turnover in their organizations are better positioned to control these costs.

 

Take Control of Turnover Costs in Your Organization

With 84% of employees planning to search for a new job in 2012, it is crucial that employers understand what causes employee turnover and how to lessen the blow.

A Harvard University study found that 80% of employee turnover stems from mistakes made during the hiring process. It’s all about prevention: don’t wait until your organization has a turnover crisis. Having an intelligent and informed hiring strategy is one of the best ways to prevent excessive turnover costs and avoid the Vicious Circle of Turnover.

Learning basic hiring strategy through an online MBA combined with real life experience is the best way to properly gauge potential employees. A back ground check alone might not be enough to determine the potential worth as an employee. Personality traits and the ability to interact socially can be key factors that help determine the worth of a person and whether they will be a valuable asset to your company.

 

Jumpstart:HR can help your organization find the right people for the right jobs and help them want to stay. We offer a variety of Recruitment Solutions to ensure that you hire people with the right skills and fit for your organization. We also offer Managed HR Services plans that identify the cost of turnover for your organization and pinpoint strategies to lower turnover and turnover related costs. Contact us today to get started!

Is HR Afraid to Step on The Scale?

“You get what you inspect, not what you expect”

– Business Proverb

 

We’re almost a quarter of the way into the year 2012 but it seems like only yesterday we were counting down the seconds until the New Year and lining up our goals for 2012 and beyond. Individually we made goals to lose weight or join more clubs and corporately we made goals to retain more professionals, get more bang for our buck in our corporate overhead and more.

If you’re like most people, you wrote your goals down or at least kept a mental note of them…

…but just how good can our goals be if we’re not measuring them? Is HR afraid of the scale?

Metrics, metrics, metrics. One of my favorite roles in HR Consulting is establishing and tracking HR Metrics.  Measurements used to determine the value and effectiveness of HR strategies. Typically includes such items as cost per hire, turnover rates/costs, training and human capital ROI, labor /productivity rates and costs, benefit costs per employee, etc.

Metrics are the foundation for growth. If you don’t know where you are, how will you know what it takes to get where you are going? If you are driving from your town to the next major city, that experience is full of metrics. You’re measuring the time and distance that it takes with your GPS. You’re looking at your gas tank to see if you have enough gas. And you’re even probably going to take a bathroom break to make sure you don’t have to “go” before you get to your destination! Why is Business any different? We make goals but do not take inventory of statistical data that helps give us a clear picture of where we stand and what it takes to get where we want to be.

Fighting monsters in the dark. What happens when you drive for growth but do not take into account the metrics surrounding the move? It’s like boxing in the dark. Sure you may be able to identify some key general areas that will always improve as a result of changes but you can hardly know how effective your decisions are and that can be a time and financial drain. The best planning involves calculated investments of time and resources  into the areas that matter most. Metrics help in this a great deal.

 

What are some common HR Metric formulas?:

Metric Formula
Absence rate # days absent in month ÷ (average # of employees during a month x  # of workdays)
Benefit or program costs per employee total cost of employee benefit/program ÷ total # of employees
Benefits as a percent of salary annual benefits cost ÷ annual salary
Compensation as a percent of total compensation annual salary ÷ total compensation (salary + benefits + additional compensation)
Compensation or benefit revenue ratio compensation or benefit cost ÷ revenue
Cost per hire recruitment costs ÷ (compensation cost + benefits cost)
Engagement or satisfaction rating percent of employees engaged or satisfied overall or with a given aspect of the workplace
Percent of performance goals met or exceeded # of performance goals met or exceeded ÷ total # of performance goals
Percent receiving performance rating # of employees rated under a given score or rating on their performance evaluation ÷ total # of employees
Revenue per employee revenue ÷ total # of employees
Return on investment (ROI) (total benefit – total costs) x 100
Time to fill (average) total days taken to fill a job ÷ number hired
Training/development hours sum of total training hours ÷ total # of employees
Tenure average # of years of service at the organization across all employees
Turnover (annual) # of employees exiting the job during 12 month period ÷ average actual # of employees during the same period
Turnover costs total costs of separation + vacancy + replacement + training
Utilization percent total number of employees utilizing a program/service/benefit  ÷ total number of employees eligible to utilize a program/service/benefit
Workers’ compensation cost per employee total workers compensation cost for year ÷ average number of employees
Workers’ compensation incident rate (number of injuries and/or illnesses per 100 full-time employees ∕ total hours worked by all employees during the calendar year) x 200,000
Yield ratio percentage of applicants from a recruitment source that make it to the next stage of the selection process

 

Leadership Takeaway: Metrics are not to be used as a tool for micro-management but they are a tool to be used for effective leadership and guidance. Jumpstart:HR offers a unique year-long HR Outsourcing/Advising service to it’s costumers that allows us to chart metrics and for your organization and recommend  growth strategies that are both measurable and cost-effective.

Human Resources Takeaway: HR is constantly asking to prove itself by the value added contributions that it brings to an organization. If you’re having trouble communicating your value to Senior Officials then it may be time to consider Jumpstart:HR as a trusted Strategic Partner. Work with us to define your specific HR goals and manage them in a long-term plan.

Professional Development: Dead-end jobs are found in organizations that don’t track metrics that a relevant to your career growth and development. When interviewing for a position, ask what kind of tools the organization uses to track staffing and career development. If your organization doesn’t do such things then it may be time to hire your own personal HR Department. Jumpstart:HR offers personal career development coaching sessions to help you get the most out of your career.

Why Companies Aren’t Getting the Employees They Need – WSJ.com

From a newly released Wall Street Journal article:

“The conventional wisdom is that our education system is failing our economy. But our companies deserve a lot of the blame themselves.”

“Unfortunately, American companies don’t seem to do training anymore. Data are hard to come by, but we know that apprenticeship programs have largely disappeared, along with management-training programs. And the amount of training that the average new hire gets in the first year or so could be measured in hours and counted on the fingers of one hand. Much of that includes what vendors do when they bring in new equipment: “Here’s how to work this copier.”

What are your thoughts?