Global Executive Solutions

How To Minimize Hiring Impact On Cost

You suddenly have a surge in sales or realize that schedule is slipping, so you decide to increase headcount to catch up. Is this the best way to alleviate this problem and if so, how do you minimize impact on cost and schedule? 

Many studies have shown the negative impact of new hires on productivity, which increases costs and results in more missed delivery dates. 

Unplanned and sudden increase in headcount could result in as much  

as 20% increased cost and delayed schedule. 

  • Center of Advanced Human Resources Studies (CAHRS) at Cornell concluded that typical new employees spend a minimum of 260 hours before reaching full productivity. 
  • Fairfield County Business Journal reported up to 20% Productivity Erosion during new hire.  
  • Not only are new hires less productive, but experienced employees are training and watching new hires which affects their own productivity as well. 

Whether it is attrition rate or surge in sales, many companies resort to increasing headcount and realize a sudden decline in their Cost Performance Index (CPI). CPI is calculated by dividing earned hours by paid hours as shown below: 

 

 

Here are some ways to minimize hiring impact on CPI. 

  1. Maximize output from existing workforce by reducing delays, downtime, and rework. 
  1. Determine and adhere to the recommended absorption rate for each department or business unit. 
  1. Have a robust Operating and Training System in place to minimize learning curve. 
  1. Set clear daily goals, follow up throughout the day, and conduct daily reviews. 
  1. Avoid costly mistakes by properly pairing new hires with experienced employees.