Firing Freeze

In a tough economy, layoffs can seem unavoidable. But letting go of human capital can be costly.

by Brian Staker

“Human beings are the only resource that has the ability to solve a problem. Why let go of them?” That question, posed by Ed Navis, a nationally recognized HR consultant and author of Confessions of an HR Professional: Secrets for Getting Your Foot in the Door, isn’t a common query for most business leaders, but it should be.

Especially in times like these, when the bottom line is more important than ever and all costs are scrutinized, laying off employees often seems like a good cost-cutting decision, but doing so may actually be more expensive in the long run.

It’s a decision that should be considered carefully against long-term events, as layoffs might just create the need to hire more people down the road. And the costs of on-boarding a new employee are far from insignificant — in terms of human resources time, losses in productivity and sheer financial cost, Navis has found that the multiplication factor can reach two to three times the replaced employee’s salary. “It could be as much as $100,000 depending on the employee,” says Gina Yoder, HR manager at Access Development, a Salt Lake City affinity marketing firm in the Utah 100 and recently named a Work/Life Award recipient by the state as one of “Utah’s Best Places to Work.” Navis cites hidden costs including unemployment and COBRA benefits, the cost of placing ads, and perhaps a headhunter. “If the employee was a salesperson, then it’s exponentially longer to make up the difference, because they typically take their book (of leads) with them.”

All-weather hires

Though times are tough and some companies have found it regrettably necessary to choose employee layoffs, some industries are actually finding that business is growing in the face of recession trends, and they need added personnel to keep up. What might make your company stand out in the market for new employees? It’s not just about salaries anymore. Navis has found that “people are most attracted to the job where they can have the most impact on the outcome.” It’s not as much about money as it is about meaningfulness.

“Recruitment is a strategy,” says Navis. “Job boards do not work because you have no control over who’s responding. Eighty-five percent of job matches are found through networking, in groups like industry associations.” Yoder says that her firm relies heavily on employee referrals to get new hires. “It’s a mutual benefit,” she explains. “Referrals are incentivized, but employees also want to bring their friends into the family-like atmosphere.”

It’s just as important to eliminate weak candidates as it is to seek out power players. Look for any obvious reasons to not hire people, such as a negative work attitude that may be communicated even in their writing. An initial response to an opening, such as a letter of interest or resume or even phone call, can be used to screen potential candidates to decide who is worth your time interviewing. “Ask why they left,” says Navis. “If they say, ‘They made me answer phones all day,’ and that’s part of your position, the job isn’t for them.” Have they researched your company and looked at your website? ARUP Labs, which has also won a Work/Life Award, also looks for certain qualities in candidates, says HR Director Roy Prasad. “Our mission is to provide excellent patient care and continue the academic mission of the university,” he says, “and we look for people who can embrace that.” Access Development uses the “topgrading” method, a formalized approach to hiring that Yoder says “trains all managers to seek only A-players.” Their screening starts with a scorecard rather than bullet points, she says. “Each job has a list of accountabilities, responsibilities and competencies, and screeners try to determine if they measure up before meeting in person.”

The interview process offers an opportunity to get to know the candidate in greater depth and determine whether there exists a good match with your company. “Are they able and willing to do the job?” Navis asks. “Past behavior is the only indicator. If you ask them about how they handled their last difficult customer, they have to show effectiveness.” His interviews never take less than an hour, and they delve into character as well as qualifications. “Beyond the basic requirements, we are looking for a kind of energy and enthusiasm,“ says Prasad. “We may take up to five interviews,” he adds. Access Development often calls candidates back for two or more interviews, with two interviewers. “We get a lot of info up front and spend a lot of time getting to know them,” Yoder says. It’s not just about matching a skill set, but also the corporate culture.

Welcome aboard

Once you’ve arrived at a candidate who is the best match for the position, that’s just the beginning. More than just training, there is a process of “ramping up” a new hire gradually to meet the expectations of the position and a need to acclimatize the new employee to your corporate culture. On down the road, the working relationship with the employee, like any relationship, must be developed and nurtured. After two weeks of general on-boarding, Yoder says, Access has more days of job-specific training with the direct supervisor. “Don’t expect employees to hit the ground running,” says Navis. “That’s a recipe for disaster. Expect to explain the tasks, have a learning curve, find them a mentor and give them time.” Access follows a similar ongoing program for on-boarding their new hires, says Yoder. “Even after an employee has settled into the routine of the job, they attend follow-up training monthly, and the CEO has brown-bag lunches every employee can attend.”

Keep a good thing going

Companies need to focus on what they can do to retain employees who are making a valuable contribution, and must find ways to attract quality people when openings arise. A good relationship is based on trust, and that works both ways, with expectations of both employer and employee clearly defined and responsibilities and rewards outlined. Competitive salary and benefits packages are vital, which Access and ARUP are both known for. Moreover, Yoder believes that Access’s greatest draw is the family-like culture, while Prasad notes that educational opportunities and a feasible career ladder are important at ARUP.

You don’t want your quality people finding reasons to look for greener pastures, even as difficult as the job market is. Instead of cutting salaries, which sends a message that the company is in trouble and layoffs might be ahead, Navis suggests providing incentives for finding ways to save the company money.

Remember that the “human resources” — the actual brains and brawn that drive your company — are “human” first, with all the complexities, strengths and weaknesses implicit in human beings. That means taking into account all their characteristics that can help them not only succeed or fail at a position, but also be motivated to excel. They are feeling the stress of a difficult economy at least as much as you are, especially if they are looking for employment. But if you can engage and develop the right personnel for key positions in your company, they will aid in its success like nothing else can.

What does a CEO have to do with hiring?

Ed Navis, a nationally recognized HR consultant and author, has the novel idea that human resource departments should advise CEOs and help executives who may have lost the “human touch” stay connected. “The CEO’s only job is to let employees know how much they are valued,” Navis says. “You should create an environment in which they are challenged and they trust you. You also need to be honest.”

“Our CEO, Larry Maxfield, says that great employees create a great culture, not the other way around,” says Gina Yoder of Access Development. She adds that Maxfield tries to be available to all employees for periodic lunches and also participates in company sporting events.

Carl R. Kjeldsberg, ARUP CEO, uses the natural beauty of the environs around the company’s campus to foster working relationships, leading walks through nearby Red Butte Gardens. “He effectively communicates the company philosophy,” says ARUP’s HR Director Roy Prasad, “and treats employees less like workers and more like individuals.”

“If a CEO is perceived as ‘profit at all costs,’ employees will treat customers the same. They keep saying customer service is not an HR issue,” Navis says, “but treat employees good and they’ll treat customers well, and business will grow.”