New hires that terminate prior to achieving minimum performance standards are called false starts in the pre-employment testing industry. Typically, these are people who separate from your organization for one reason or another within 90 to 120 days. And if you’re anything like 78% of HR departments we’ve surveyed (see Fig. 1) your common practice is to report turnover as a percentage.
The problem with reporting turnover as a percentage is that no one owns the waste. A percentage obscures the financial implications and when reported at the company level, it obscures accountability. This means no one owns the responsibility for properly managing and reducing false starts. Not you, not your department, not the managers of the department experiencing the highest rate of turnover.
For example, if you reported that during the last year your organization experienced 9% turnover, you might assume that things are in line with industry norms. But if you take a closer look at those false starts, perhaps you would discover that of the reported 9% company-wide turnover, 70% came from one department in the form of false starts, separated in less than 60 days on the job. Each individual false start will mostly likely require a replacement. Plus, the loss in productivity, team and hiring manager frustration, and investment in recruiting and training for each replacement will cost the company thousands of dollars. Now that paints a very different picture than “9% turnover.” (See False Start Waste and Rework ROI Calculator)
If turnover is not measured, does it happen? 80% of companies do not measure 120 day turnover. (see Fig. 2) Where else in your company would a business process with high waste costs not be measured, managed and receive the focus of reduction efforts?
Following are some action steps to help you reduce staffing waste from false starts, and to help you shift your paradigm from, “Turnover is a percentage that no one owns,” to, “False starts are a form of staffing waste that I’m accountable for reducing.”
First, you can identify the jobs with the highest level of false starts. Using the head count or turnover report in your human resource information system (HRIS), you can do a quick query of individuals with a tenure less than 120 days.
Next, start documenting the cost of on-boarding. If your company embraces Six Sigma, team up with a green belt or black belt on a project to address this. Form a cross-functional team with the hiring managers and the training department to understand the true financial implications—dollars invested—of on-boarding for the first 120 days. Once these figures are known, you could begin working directly with the CFO to identify the budget codes related to various on-boarding activities. Then you’ll be able to create reports that track and report the cost of on-boarding and document the waste from false starts.
By approaching the cost of on-boarding with greater analytical literacy and accountability as described here, you’ll be able to continuously monitor and report staffing waste to the executives within your organization. With someone now owning the responsibility for reducing staffing waste from false starts, ROI can be calculated and improvements to the bottom line can be realized. And you may want to take credit for that.