How Hiring the Wrong Person Eats Profits with Rocky Lalvani of Profit Comes First

2022-05-12

We often hear data on how much bad hire costs you and your company. About 3x the person’s annual salary. But how much did the interview process itself cost? For a startup to make a hire, the company spends about 73 total hours interviewing. With the most significant cost being 30 hours of the production team's combined time. And this is assuming that 6 people make it through a full interview to get to the hire. We have to ask ourselves, can we really afford to lose almost 4 days of productive activity to interview? Roughly $9,855 per role, not including candidate marketing or recruiting fees. As a small business, the answer is NO...

We often hear data on how much bad hire costs you and your company. About 3x the person’s annual salary.

But how much did the interview process itself cost?

For a startup to make a hire, the company spends about 73 total hours interviewing. With the most significant cost being 30 hours of the production team's combined time. And this is assuming that 6 people make it through a full interview to get to the hire.

We have to ask ourselves, can we really afford to lose almost 4 days of productive activity to interview? Roughly $9,855 per role, not including candidate marketing or recruiting fees.

As a small business, the answer is NO!

Guest Bio:

Rocky Lalvani of Profit Comes First, serves as Chief Profitability Adviser for business owners. He teaches them how to ensure they get paid and make profit a priority! As a certified Profit First Professional he implements Mike Michalowicz's Profit First System.

Rocky started with nothing when his parents immigrated to the United States when he was two years old, and his parents were in their 40's. It was his parents' second time starting over in life as they moved here to experience the American dream.

In spite of a lot of struggles and his mom passing away when Rocky was 7, he has been able to achieve financial and life success. Rocky loves to share his journey and inspire others to achieve their dreams even faster.

Today we discuss:

Why it is critical to understand what interviewing costs
How to maximize your team's time with structure

Challenges today?

Employees are the major cost for the business
- Employee should provide a return for the business
- Return of Cost of person (taxes, unemployment)
- Inefficiency does not show up anywhere on the p&l
Wealth is built on the balance sheet!

Why is this important to the company?

Costs to the company hiring
- Reduces morale
- Loose customer
Nobody is tracking interview or training costs
Hard costs that are very difficult to figure out
As a client- doesn't want to do business with a company that hires wrong
(leadership issue)

Rick’s Nuggets

Team time waste!
- People who meet the team must be positioned properly
- Demonstrate strong leadership in protecting time

How do we solve the problem?

Mission values purpose
- This is the step most business owners skip!
- Or in their head, but no one else knows
- Hire to it
- Have to live it
Hire in alignment with mission, values, purpose
- Not who you like
- Having a interview process
Understanding the real cost
- Bad Hire- Employee does not provide any value
  - Mistakes
  - Morale for everyone else
  - Lose clients/ client trust
  - Example Costco vs. Sam's
Gross profit / Total payroll including taxes
- For every $1 in payroll returns x$ in gross profit
- Measure & Know
- Need to be making at least 2X payroll
- It all comes back to leadership!

We change the accounting formula of Sales - Expenses = Profit to Sales - Profit = Expenses. This ensures Profit comes first! (PS. It's not about money at all costs, people come before money!)

Rick’s Nuggets

Values - most important
Protect time costs
Structure interview
- Each step is a decision
- Only progress value aligned, well positioned & accomplished people
- Decisions must have evidence to back
Eliminate uncertainty
- Assign interview questions
- Prepare all for success

Key Takeaways that the Audience can plug into their business today! (Value):

Is mission vision purpose written down & do your employees know it?
Cost of a bad hire for you?
How much profit do your employees bring you?

Guest Links

LinkedIn: https://www.linkedin.com/in/rocky-lalvani/
Company: https://profitcomesfirst.com/
LinkedIn: https://www.linkedin.com/company/profit-comes-first/
Twitter: https://twitter.com/rockylalvani
Facebook: https://www.facebook.com/richersoul/
Instagram: https://www.instagram.com/richer.soul/?hl=en
Blog: http://richersoul.com/
Podcast: https://podcasts.apple.com/us/podcast/profit-answer-man-implementing-the-profit-first-system/id1508245322

Host Links: