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New Hire Turnover: The Cost of a Poor Talent Acquisition Strategy

April 21, 2014

Hiring best practicesThis article is inspired by an article in Inc. Magazine entitled “Why Employees Quit Jobs Right After They’ve Started”. Inc. Magazine author Adam Vaccaro references a work-force insights study by credit reporting agency Equifax.

Forty percent of employees who left their jobs voluntarily in 2013 did so within six months of starting in the position, according to data recorded and processed by the work-force insights arm of credit-reporting agency Equifax.

Another 16 percent of all employees who left on their own choosing did so within 12 months, meaning more than half of voluntary turnover happens within a year of new hires’ start dates.

Equifax Workforce Solutions director of product Kristen Lewis tells Inc. that many employees approach new jobs with the belief that “they can find something else if it’s not a great fit right away.”

Note that the rate at which employees left inside of six months was about twice as high for employees paid hourly than those who pocket a salary. Lewis states only a slight majority of employees who left voluntarily did so for greater pay, with 44 percent staying equal on pay or taking a pay cut to switch positions. “It supports the concept that culture and opportunity play a big role,” Lewis says.

A cut in hours for hourly employees, meanwhile, makes a big difference in when they’ll eye the door. Lewis said Equifax’s data shows that for every four hours cut from an employee’s schedule, there’s a corresponding 5 percent jump in the likelihood he or she will take a new gig.

The idea that fast voluntary turnover–that is, turnover after less than a year on the job–is higher for hourly employees might call to mind transient industries such as retail and restaurant work, the kind of job that’s dominated by hourly work. And indeed, more than 64 percent of new hires in retail and about 66 percent of those in leisure left in that time frame.

Likewise, the business services industry–largely composed of temporary staffing–sees 65.7 percent of new employees move on within a year.

More than half of voluntary turnover in the transportation industry happened in less than a year. In the information industry, that number is about 43 percent. In financial services, 37.5 percent. In health care, nearly 37 percent. In construction, over 100% percent per year.

And across all industries, employees are more likely to leave voluntarily inside of their first six months than in months six through 12.

Voluntary turnover in general was up 3.5 percent in 2013, according to Equifax. The Department of Labor has also seen a recent increase in the “quit” rate, according to the The Wall Street Journal. Voluntary turnover is generally lauded as a positive sign for the economy, indicating that enough jobs are out there to allow employees to hop around the market. And many companies embrace the idea of being net exporters of talents, as a positive sign of their ability to nurture talent.

Is Your Talent Acquisition Strategy Keeping You From Making Mistakes in Hiring?

At The Nielson Group, one of our areas of competency is focused on improving the quality of hiring for our clients. We don’t source the candidates but we do provide strategic advice for how to improve sourcing. We don’t interview your candidates (except under specific executive candidate evaluation work) but we do assess the candidate and determine how well they fit your needs using a two step assessment strategy. We also recommend specific interview questions you’ll need to ask to understand as much as possible about the candidate before making an offer.

We’ve become experts in predicting the future of your candidates. We don’t tell you to hire or not hire, but we do explain how much risk we see and why. If you have experienced a period of apathy about your hiring practices and the outcomes, give us a call at 972.3436.2892. There are many assessment tools on the market that claim to be effective at helping you hire the right people but don’t have the data or client testimonials to back it up. We average at least one new client per month due strictly to independent current client recommendations.  Let us learn more about your company, the type of people/experience you are trying to hire and discuss a customized strategy that gets the results. The alternative is costing you much more money than our services will ever come close to costing you. Need testimonials? We’ll give you as many as you’d like including key contact name, their title, their company name and phone number.

In business terms, you can’t afford 50% or more first-year turnover.

Carl Nielson is founder and managing partner of The Nielson Group, an organization/talent management consulting firm. Carl has 18 years of Fortune 250 human resource management experience and 15 years consulting to small, family owned, mid-cap leaders and Fortune 100 multinational corporations. He is certified in the use of leading talent assessments and guarantees his work.

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