Hiring

The ROI and Financial Impact of Hiring the A-Team

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I must be a Neanderthal when it comes to hiring. I still don’t understand why so many companies focus more on the cost of hiring rather than the impact the people hired can make. For example, consider this scenario:

·       At $100,000 per person, the compensation spend for every 100 staff-level hires is $10 million every year.

·       This group of 100 staff-level hires should, on average, bring in $50 million in additional revenue and about $20 million in incremental profit every year. (This assumes $500,000 revenue per employee at 40% variable pre-tax profit margin.)

·       If the A-Team (those who exceed expectations) is just 25% better than the Core team (those that meet expectations), the additional profit is $5 million every year.

·       The cost to hire the A-Team is modest in comparison to their impact. The first year ROI is more than 750% and 2-3X that in subsequent years.

·       While you might save a few hundred thousand dollars being more efficient by hiring the “regular” 100 people, not hiring the A-Team is costing your company millions of dollars every year. Since the A-Team has lower turnover this is a gift that keeps on giving.

To better understand this impact, divide the people your company hires into these three big groups:

·       Core Hires: These are the people who generally meet their performance expectations and typically represent about 50-60% of the workforce.

·       The A-Team: These are the people who consistently exceed their expectations by doing more than required, doing it faster or doing it at higher quality. This is the group that also tends to get promoted more quickly and referred more often. They represent about 20-25% of the workforce.

·       The Underperformers: These are the people who shouldn’t have been hired for one reason or another. They represent about 15-20% of the workforce.

To get a sense of your recruiting department’s current underlying focus, classify all current and proposed initiatives by their underlying purpose and assign it to one of these three groups. Typically the emphasis is on efficiency, compliance and mistake avoidance – hiring the Core team and avoiding the Underperformers. Rarely is it on hiring the A-Team which includes diversity hiring. With your current mix in mind, here are some ideas on how to make the ROI case for hiring more people for the A-Team.

Rethinking the Cost and ROI of Hiring the A-Team

1. Consider total costs, not just hiring costs.

Aside from the actual cost of hiring a person, few people consider the impact these people can make once hired. Even fewer consider the cost of excessive turnover and the extra time a hiring manager needs to spend managing a weaker person who needs extra support or coaching.

2. Think investment and strategy, not cost and tactics.

You’ll never be able to increase quality of hire, increase diversity hiring and raise the talent bar by being more efficient doing what you’re now doing. Developing a scarcity of talent strategy starts by dismantling one based on the assumption there is a surplus.

3. Rewrite your job descriptions by defining exceptional performance, not an exceptional person.

There are plenty of A-Team caliber people who underperform in the wrong situation, that’s why it’s important to clarify expectations up front and match people to work they find most motivating. There is no cost to do this since you’ll need to tell everyone the details about the job once they start anyway. A big plus: telling everyone about the actual job before the hire will also increase Core team engagement and performance after the hire.

4. Benchmark the A-Team to reallocate your sourcing efforts and expenses.

The A-Team does not look for or find new jobs in the same way the Core team does. Reducing job board advertising will offset some of the costs associated with having your recruiters handling fewer requisitions and spending more time on networking and passive candidate recruiting.

5. Slow down and spend more time with fewer candidates.

It takes hours spread over weeks for an A-Team caliber person to fully appreciate all of the factors involved in switching jobs. This takes a series of discussions with the recruiter and hiring manger, each one providing more insight into the career potential of the new position. Done properly, hiring managers will not need to see as many candidates to get one hired even though they’ll need to spend more time with the few they do see.

6. Negotiate on career growth, not compensation increases.

While you might need to pay a compensation premium to hire some A-Team members, this is not always necessary especially when the job is positioned as a growth move. Even better, by focusing on high potential A-Teamers, compensation rarely needs to exceed the existing budget requirements.

When a company’s hiring focus is on minimizing hiring mistakes, saving money and being more efficient, it’s hard to hire the A-Team without breaking the rules. Given the enormous ROI impact, it might be better to come up with some new rules

 

Asking Salary Is Banned

As of last week, the interview question "What's your current salary?" is illegal in New York City, and it will soon be prohibited in other places as well.

The law, which bans employers from asking candidates about their salary history, is the result of months of work by the city's Commission on Human Rights and growing political support.

How could it impact you? CNBC Make It talked to multiple labor and employment lawyers to find out.

1. Advocates hope it will lessen the pay gap

Many argue that because of the pay gap between men and women, especially women of color, the practice of asking a candidate's salary history is harmful.

In announcing the law, Chair and Commissioner of the NYC Commission on Human Rights Carmelyn P. Malalis said in a statement said:

"Women and people of color deserve to be paid what they're worth, not held back by their current or previous salary. Today's law will enable job seekers to negotiate a fair salary based on their skills and will help break the cycle of income inequality that has been so prevalent in the workforce for so long."

Women are paid 20 percent less than their male counterparts performing the same job, according to the Institute For Women's Policy Research. In other words, for every dollar a man makes, a woman earns $0.76.

It's even worse for women of color. Latina women are paid 46 percent less than white men and African American women are paid 37 percent less.

  Thomas Barwick | Getty Images

Thomas Barwick | Getty Images

"There's a cycle of gender pay inequity that's been going on for as many years as anyone's been measuring compensation by gender," Miriam Clark, a labor and employment lawyer who represents employees in disputes, tells CNBC Make It.

It may not be intentional, Clark added, but the impact still discriminates against women.

"It has a discriminatory impact on women because I think it's statically unarguable that women make less than men," she said, "really at every rung of the ladder all the way up."

2. There are still legal ways for employers to ask about your salary

Employers can still ask candidates about their "salary expectations," or the amount of money they would like to make in the new role.

Employers in New York City can also ask about "objective measures" of the applicant's productivity, Merrick Rossein, lawyer and professor at the City University of New York School of Law, tells CNBC Make It.

In other words, employers can still ask about how much you made in annual bonuses if you are in sales or other commissions-based sectors. Employers can also ask you to disclose your salary after an offer is made. If you lied in your interview, you could legally be fired.

  Bloomberg/Getty Images

Bloomberg/Getty Images

Jill Rosenberg, an employment and labor attorney who represents employers, told CNBC Make It that employers ask that question to get more information on what to offer a candidate.

"You don't want to insult somebody and make an offer that's lower than what they're earning if you're trying to recruit them away," she says. "That's probably the most common reason."

A candidate's current salary, she said, is one of several factors hiring managers consider when making a salary offer. She added that companies aren't out to low-ball candidates.

"Employers are also interested," she said, "and this is not to say that employers try to pay people less than they're entitled to, but you don't want to overpay people either."

3. The question will soon be illegal in more places

In addition to the Big Apple, the question is also illegal in New Orleans, Oregon and Puerto Rico.
 

Asking about a job candidate's salary history will also soon be banned in Delaware, where a law takes effect in December, as well as Massachusetts and San Francisco, where similar laws go into effect in July 2018.

Philadelphia passed its own version of the law in May, but is now facing legal challenges from the city's Chamber of Commerce on the grounds that it violates the First Amendment rights of the Chamber's members.

California Governor Jerry Brown signed a salary privacy bill into law that will make it illegal for employers to ask job applicants about their former salaries and benefits starting January 1, The Orange County Register reports.

4. But you may still be asked

If you're asked this question during an interview in a place where it's illegal, Rossein said you should politely remind the hiring manager that you don't have to answer it.

He suggests saying something such as, "Pardon me if I'm wrong, but it's my understanding that that question isn't legal here."

Immediately afterward, however, express that you're still interested in discussing compensation. You could follow up by saying, "However, I'm very interested in this job and would be happy to discuss compensation ranges and goals."

This shows that you are still cooperative, without potentially limiting yourself from a salary boost. Another way to shift the conversation from your current salary is to focus on the skills you bring to the table.

Nicole Hill Orisich, career coach in New York City, said you could say something such as, "I'd love to talk about the value I bring to the table as well as the market value for this position. Based on my own research for someone with my skills in this industry, I believe market rate is somewhere between X and Y. I would be happy with something in this range."

The reality is that despite legal protections, not answering the question could potentially hurt your chances of receiving the job offer, Roessein notes. He adds that it would be hard to make your case in court.

"I think this is a very important development in law," Rossein said."You're going to see a lot of legal activity around these salary issues."

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