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  Home > Employment Testing > How ExpertRating Helps You Avoid Hiring Mistakes
How ExpertRating Helps You Avoid Hiring Mistakes

It has been widely proven that structured assessment methods have a solid empirical basis, a long and consistent record of validity, cost-effectiveness, and have proven fair and practical. ExpertRating skills assessments have helped hundreds of companies efficiently and intelligently pick out the right employees from the mass of potential candidates. Our scientifically developed testing procedures have helped corporations make well informed hiring decisions, hence reducing the chances of bad hiring and its associated risks and costs.

Hiring mistakes are costly and time consuming. The cost of a new hire at the $20,000 level is estimated to be $40,000. These costs include wasted salary, benefits, severance pay, headhunter fees, training costs, hiring time, and wasted business opportunities. One way to hedge against the extraordinary costs of bad hires is to use effective pre-employment testing. An article in Fast Company magazine in 2004 said "Whether building a team or adding talent to an expanding company, hiring decisions are among the most difficult and important choices to make".

The financial loss of bad hiring doesn't end when the underperforming employee leaves your organization. Corporations have to bear substantial employee separation and replacement costs. Let's take a look:

Separation costs

  • Administrative costs relating to processing separations
  • Increased unemployment taxes if a claim is filed
  • Wages, benefits, or other compensation paid to employees after separation

Vacancy costs

  • Costs of additional labor to meet customer demand without loss of productivity or costs of lost productivity if the position is not immediately filled
  • Costs associated with customer relations problems that may arise during this period, such as costs from lost sales.

Replacement and training costs:

  • Recruitment (advertising)
  • Selection (interviewing or assessment)
  • Hiring (administrative procedures)
  • Training (may include costs related to lower levels of productivity among new hires)

Using a ballpark estimate, a business that employs 500 workers with an average compensation of $30,000 will spend $487,500 in turnover costs if its turnover rate is 13 percent. By reducing the turnover rate by one percentage point, costs are reduced by $37,500 to $450,000. (A study indicates that employee turnover rates are as high as 23.4% in some industries, which means a very large financial cost to these organizations.)

According to the Saratoga Institute, the average cost of turnover per employee is the full year's salary of the departing individual. Thus, in a situation where a company with 100 employees and an average annual salary of $35,000 experienced a turnover rate of 15%, this could mean up to half a million dollars a year just in employee turnover costs (via Optimize Magazine, January 2005).

Your organization can avoid all these costs by properly assessing the skills, capabilities and knowledge of new hires through ExpertRating for as low as $4 per test- a tiny sum compared to the huge costs of bad hiring decisions.

The U.S Department of Labor and Statistics indicates that half of all new employees stay in their jobs for less than six months. Some are promoted, but the majorities quit or get fired. The department of labor findings makes out a case for using skills assessment as an effective tool during the employee selection process, which will help retain better people for longer. As competition intensifies, and the fight for talent increases, companies cannot simply afford to shrug off employee disengagement and the potentially high costs of turnover.  

Some special considerations apply to IT hiring. IT workers vary greatly in their productivity and quality, providing a powerful incentive to employers to select the best. For example, one study found that the performance of programs written in C and C++ varied by a factor of 30% or more, depending on which programmer had written it. Because of these wide variations, organizations that can successfully identify and hire the most qualified job applicants are likely to be substantially more efficient and profitable than other organizations.

So if you want to choose the right candidates to power your organization in to the future, you need the right tools to identify the top performers from amongst the multitude of job applicants. ExpertRating skill assessments are what you need.

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