What Is the True Cost of Hiring the Wrong Person?

August 03, 2021

The news was not good.

What every small business owner dreads, especially those with a very small staff of employees.

My staff at D.R. Wastchak was only 12, and Justin handing in his 2-week notice to take another job was a big blow to our business.

Justin had been with our company for about three years and had progressed from a field inspector to the office where he learned how to run computer plans analysis for our builder clients as the Assistant Plan Review Coordinator.

He was now the Plan Review Coordinator and the one and only plan review person we had on staff.

Needless to say, his departure set-off a flurry of panicked activity, and plenty of stress for me and the rest of the team as we scrambled to fill the hole in the dam.

This departure would effectively put me out of commission on most other work for the next 45 days, if I was lucky.  Many more days if I wasn’t.

Not only did I have to find and hire Justin’s replacement, once he was gone I had to make sure the work he had been doing was completed by someone else until a replacement could be found. Someone inevitably less productive than Justin.

The new person we hired would be trained by yours truly, and 100% of their work had to be reviewed and approved by me until they completed their Home Energy Rater certification (a 60-90-day process).

The actual cost to my business to replace an employee was always a bit of a mystery, although even without an exact number, I always figured it was significant.

Mystery Solved

A report published by the Center for American Progress analyzed “30 case studies in 11 research papers published between 1992 and 2007 that provide estimates of the cost of turnover, finding that businesses spend about one-fifth of an employee’s annual salary to replace that worker.”

Justin’s annual salary was $35,000, meaning the cost to my business to replacement him was about $6,100 using data from the Center for American Progress report.

Yeah…definitely significant!

The report cites data from the Bureau of Labor Statistics that, “about one-fifth of workers voluntarily leave their job each year and an additional one-sixth are fired or otherwise let go involuntarily.”

Regardless of the reason an employee leaves, the cost to replace them is the same.

While eliminating departures would be a dream, but of course impossible, what if there was a way to reduce both voluntary and involuntary departures?

Think of how much money small businesses would save?

Think of all the stress, anxiety and struggle that small business owners would be able to reduce if they could hire the “right people” for their team, people that were much more likely to stay longer and be more productive, engaged, and bought-in to the work they did every day?

What if I could have kept Justin on board for a longer tenure than three years (about the average turnover time for my staff at D.R. Wastchak)?

I would have loved having 45+ days of my life back, avoiding the stress and struggle, and using the estimated $6,100 for something way more productive!

When I rebuilt D.R. Wastchak starting in 2016, I was committed to finding a way to hire better and keep members of my team around longer, ensure they were more productive, more engaged and bought-in to the work they did every day, and I did. It worked!

You Can Hire the "Right People" Too

Next week, I’m going to tell you how you can learn the exact formula I created to significantly improve my recruiting, hiring, and employee review processes.

I’ve worked the past three-and-a-half years, since selling my company, to create a way to teach what I learned to other small business owners so they could become more “Freedom Focused”, greatly increasing their personal and professional freedom.

On August 30th, that work will finally be revealed to all of my friends, colleagues, and small business community network.

Look for an announcement next Tuesday for a special opportunity to get a peek at my new course.

And oh by the way, my course is way, way less expensive than replacing an employee! 

That's right, a course that pays for itself and then some.

Can't wait to tell you all about it!

Until then, stay focused on your freedom!

Listen to the podcast episode: "What is the True Cost of Hiring the Wrong Person?"

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