How hiring cheap hurts your bottom line
February 14, 2020 | 12:55 pm CST
When I first started my business, I was the King of Micromanagers.
I had so much control over the process that I didn’t really care who I hired, as long as they were cheap. I needed warm bodies that would fill spaces on my shop floor without costing the company too much.
We did make a profit during that time, but our growth had stagnated. My micromanaging made it impossible for the company to grow beyond what I, personally, could do on the shop floor. We also had a high turnover, so we spent a lot of time training employees who didn’t end up sticking around for long.
Several years ago, I decided that if I wanted to grow, then I needed to make a change. It was time for me to start hiring employees who were invested in the company, not just their paycheck. Instead of hiring ‘D’-grade employees, I started hiring ‘C’ and ‘B’ employees with the ambition of raising them to ‘B’ and ‘A’ employees.
A RECIPE FOR CHANGE
The process of making such a drastic change didn’t happen overnight for me, and it won’t for you either. The simple truth is that it takes time to find the right people when you’re pickier about who you hire. During that first year, we still had a lot of turnover because it took us time to find the hiring recipe that worked for us.
It takes trial and error, and many tweaks to your process to develop a formula that will help you find, train, and retain great employees. Here’s what we’ve found works best for us:
- We put out ads in several places, including Indeed, Craigslist, and local Facebook pages. We field applications for at least a week, but sometimes two — it depends on what we’re trying to find.
- After we end the ads, we bring in applicants for face-to-face interviews.
- Next, we narrow the field down to our top three or four applicants and invite them to do a three-day working interview. This always helps us learn a lot about them. We pay each applicant in cash at the end of the day as a contract laborer.
- After we complete all of the working interviews, we hit the shop floor to talk to our employees. I’ve found that the best way to make a hiring decision is to leave the hard part to my crew. They’re the best people to evaluate how well they got along with the applicants, how they fit into our company culture, and the quality of their work.
My recipe may be a little unconventional because I rely on my floor crew to make the final hiring decision. However, I don’t feel like it’s fair for me to make the final call since my employees spend such a huge chunk of their lives working together. In my opinion, it’s only fair that I let them choose who they want to work with based on who worked best with them.
MAKE THE MOST OF YOUR HIRE
Once I make a new hire, we train them in everything they need to know about their position. My company uses standard operating procedures, or SOPs, so we gradually train our new employees to understand and use SOPs. We don’t dump a pile of work on them and expect them to do it perfectly. That’s a recipe for disaster.
It’s hard to transition to gradual training, where you layer on a new task as they master the last one, but it’s the best way I’ve found to cultivate employees who are invested in the company and take ownership of their position.
THE TRUTH ABOUT TURNOVER
The flip-side of my recipe is hiring cheaply and quickly. It might feel like a cost savings in the moment, but hiring cheap means that you’ll have higher turnover. It also means more time spent hiring and more time wasted on training.
Turnover is incredibly costly to a company. It can stunt your growth, and it makes it very hard to maintain your quality and output if you’re constantly training new people. Scheduling is a challenge because it’s hard to get products out consistently when your team is in a constant state of flux.
There may be a few positions where it makes sense to hire cheaply, but for most of the positions in your company, hiring cheaply will backfire and blow up your bottom line.
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