How to Minimize the Negative Impact of Hiring?
You suddenly have a surge in demand 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. Research shows:
- An unplanned and sudden increase in headcount could result in as much as a 20% increased cost and delay in 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.
- New hires are less productive, and experienced employees are training and watching new hires, which affects their own productivity.
Whether it is attrition rate or surge in demand, many companies resort to increasing headcount and realize a sudden decline in their Cost Performance Indicator (CPI). CPI is calculated by dividing earned hours by paid hours as shown below:
Ways to minimize hiring impact on CPI:
- Maximize output from existing workforce by reducing delays, downtime, and rework.
- Determine and adhere to the recommended absorption rate for each department or business unit.
- Have a robust Operating and Training System in place to minimize learning curve.
- Set clear daily goals, follow up throughout the day, and conduct daily reviews.
- Avoid costly mistakes by properly pairing new hires with experienced employees.
It’s clearly important to reduce the impact of hiring on CPI. By keeping existing employees up to date on their training and industry knowledge, you can place a higher value on their output. As a result, you are setting up businesses for future success.
