Surely nothing has more impact on the success of your organization than the caliber of people who work for you. The best way to create a great workforce is to hire great people. Although many companies can take two months to decide on a new software purchase, they can typically make up their minds about a hiring choice--what’s supposed to represent their most important asset--in about an hour.

Few organizations put as much effort into hiring the right people as they do marketing or selling. Most do not understand how to place the right people in the right jobs at the right times. In this knowledge economy, it’s time to consider how your people investment contributes to your bottom line, and how to make it pay bigger dividends.

The link between personnel investment and business performance

It’s been estimated that hiring one wrong employee can cost a company up to 14 times the base salary. It’s also estimated that 60 to 70 percent of most companies’ expenditures are labor related. Because human capital makes such an impact on profitability, companies can be better served by using strategic hiring processes and quantifying employee performance.

Many employment-screening tools focus on finding good, trustworthy workers but stop short of a thorough assessment to ensure appropriate integration. You should rely instead on more discerning tools that match individual skills and potential to the right positions within your organization. Overlooking the diverse aptitudes and attitudes of job candidates means losing the opportunity to capitalize on turning those potential contributions into profitable gains.      

And while recruiting the right people is important, it too isn’t enough. Companies often “place them and forget them,” keeping employees in their same jobs for too long and underutilizing their talents. Instead, organizations must ensure that top performers and new hires are afforded tailored training opportunities and are continually placed in essential and appropriate positions. Conduct a human capital audit periodically to ensure proper placement. Then develop and redeploy your employees in order to tap into full productivity, profitability, and performance. 

Measuring the link

Which specific personnel investments make the biggest impact on your bottom line? How do workforce problems affect your company’s performance? According to some analysts, 70 percent of companies never or rarely measure the impact of HR or training. Your ultimate objective should be to evaluate your human capital investments--hiring, training, compensation, benefits, recognition programs--and determine which ones are most likely to produce the best return on investment. Doing so will help to establish where to spend limited personnel dollars.

Not all jobs in your organization make the same impact on your organization, so it’s equally wise to identify the key positions that are critical to productivity, and begin to focus your resources there. By understanding and then measuring the connection between these mission-critical positions and your financial performance, you can aggressively address ways to improve results.

Another strategy to consider is to create a kind of human resource scorecard to identify such factors as cost-per-hire, how turnover affects profit, determining benchmarks for average and above-average performance. Once you have a scorecard in place, you can move beyond tabulation toward influencing the actions that affect the measurements. 

Smarter matching, better managing

It’s time to go beyond instinct and rely instead on a more disciplined, strategic approach in your hiring processes. Combining a better hiring strategy with sophisticated people management and performance measurements will improve your profitability, both in the short term and long.