What is your "real" investment when hiring a new employee? Estimate it. . . it may surprise you! (The data you collect may be interpolated as the cost of attrition.)

My action research while with Texaco found that there was an investment in each new hire which easily matched the employee's first year salary and benefits. An employee with a $50,000 annual salary (and an estimated 30% benefits base) actually earns $65,000. The additional first-year investment in that employee might be $65,000. (This research was based on individual managerial, professional, and technical positions.) HR and OD friends of mine in various companies and industries have indicated that their research on the subject mirrors my findings.

If we use the basic principle of Human Resources Accounting, employees are considered to be CAPITAL in the true sense of the term. We make investments in capital, therefore the title of the Worksheet: New Hire Investment. In the example above, our total investment in the new hire was $130,000. (Some accounting literary license is used with terms such as costs, charges, and expenses.)

To use the Worksheet, please consider all the time (= $) associated with bringing this one person aboard. Don't forget the meetings held early on to discuss the new position, the interviews held with unsuccessful candidates, and the time bringing aboard the new hire and coaching him/her through those initial stages of employment.

Much of your investment is front loaded during the first three months "on the job." Depending on the experience and credentials of your new employee and the complexity and integration of your processes, there can certainly be a lot of down time and, in the case of sales, "lost opportunity costs" during the beginning of employment.

Two major charges are not included on the Worksheet: relocation costs (which can be documented) and “potential” severance for voluntary or involuntary termination during the first year of employment. The cost for each can add substantially to the first-year investment.

Estimate your organization's investment in the new hire. Select one open requisition and track the costs, charges, expenses, etc. accrued as a result of bringing on this new employee. For those without a chargeback system, accurate figures can be obtained from the Human Resources Department, training group, technical support, etc.

Dollar figures to the right can be used to estimate the cost of time: a one-hour meeting with four people can easily equal $200, a one-hour interview by one person with hopefully prep time can amount to $75 (x number of people conducting interviews x the number of candidates being interviewed), etc. Please feel free to round off!

Numbers (#) on the Worksheet are for reference purposes only, however, there is some order to the documented hiring process.

If you come up with line items in your organization beyond those listed on the Worksheet, please send them to me at RJZuromski@jobPerformance.com. Thanks!