Direct and Indirect Costs Due to Turnover and Loss of Productivity

Introduction

Simon Property Group (SPG), the largest public U.S. real estate company, with about 5,000 employees has taken steps to make sure quality job candidates don't slip away. In the past, each of the five retail real estate platforms: regional malls, Premium Outlet Centers, The Mills, community/lifestyle centers and international properties handled its own recruiting. This allowed potential candidates to walk into one and be turned away for lack of a professional match, even though the perfect position was open and waiting at a nearby location such as the lifestyle center.

To remedy this problem, SPG made the drastic decision to centralize their Human Resources (HR) department and implement an online employment selection system thus allowing prospective employees to see the whole array of jobs available at once. A study conducted by Unicru, Inc. revealed that companies who replace traditional paper-based hiring processes with fully integrated electronic hiring management systems. The research showed that 30 days after hire, only 68.3 percent of those using traditional hiring processes remained on the job, as compared to 80.5 percent of those hired using an electronic process (Business Wire, 2002).

This introduced new challenges for the centralized HR department as the five platforms attempted to unify their operations capabilities and workforce structures. This paper will discuss the current selection system and the challenges along with the direct and indirect costs associated with each. Then continue with a recommendation strategy to reduce these cost and the process needed to implement.

Direct and Indirect costs due to Turnover and Loss of Productivity

High employee turnover was the primary driver for centralization. The five existing selection systems were time consuming, and costly, and too many unacceptable hires were being brought on the job, only to quit and require the departments to continue their selection activity. To keep pace with its competitors in a tight labor market, SPG knew that it needed to screen, interview, and make offers to candidates all within the space of a single day. Some of the existing selection systems involved basic skills testing, others combined skills testing with behavioral interviewing. While behavioral interviewing is an effective method for selection, SPG wanted to streamline the process and ensure that only the most qualified candidates reached the final interviewing stage. The simple skills tests were not enough to do this and hiring managers were wasting too much time trying to isolate the right candidates.

The short-term cost of turnover is measurable. On average, U.S. companies experience 50 percent turnover every four years," says Sage Learning Systems in a list its has compiled of facts and figures about training, work and jobs