I was recently speaking to a group of small- to medium-sized businesses and began by asking them a series of questions: What is your margin? Your inventory cost? What is your ROI? Of course, each knew the answers and knew them to the penny. 

As business owners, we instinctively watch the financials; we are programmed to intimately know our business, our competition and the trends within our markets. We value data; we are concerned with operating expenses and we are always focused on the bottom line.

So with those questions easily answered by this group, I thought I’d ask some more questions, but this time about an organization’s largest asset, its employees, its people. Among the questions I asked the group were:

• What is the cost of hiring the wrong person?

• What is the cost of not firing someone properly?

• What is the cost of someone not being productive at work?

• What is the cost to the company when someone ends his or her employment?

The good news is that everyone said something like, “I bet a lot.” But surprisingly, no one seemed to feel confident that he or she could come close to as accurate a value as we did for the questions related to the financial side of their business.

The bad news is just that. The knowledge of how your business is performing as it relates to the people side of your business has distinct impact.

This article is intended to give you a sense of just how much this information can affect your bottom line. Here are some data related to the number side of people, and more insight into the queries asked of the group:

• One bad hire into an organization costs, on average, $53,000.

• Newsweek magazine recently reported that 72 percent of people who file wrongful discharge claims are receiving an average settlement of $572,000.

• One person not being productive at work costs an organization $32,000 per year. The United States Bureau of Labor Statistics recently released data reporting that the lack of employee engagement costs the United States over $300 billion a year.

• One valued employee walking out the door costs $35,000 on average. Towers Watson recently reported they project 40 percent of all employees will leave their jobs in the next 12 months. Do the math; if you have 10 employees and you lose four employees in the next 12 months, that is a $140,000 impact! Can you absorb the cost? Can you absorb the loss of intellectual property that walks out the door when an employee leaves? Can your business sustain with this amount of internal change?

I recently had a conversation with a business prospect. In the discussion, the individual wanted to know more about what my firm does with companies, and this person said to me, “So, are you an employee engagement specialist?” Now I have to say that no one has ever asked me that before, but do you know what my response was? “Aren’t we all?”

So, I challenge each of you to engage your employees and realize that there is a distinctive benefit to the bottom line in doing so. Develop your workforce, develop your supervisors and managers, and remember that people quit trying with employees before they quit companies.

As the labor market loosens and hiring begins, unhappy employees will begin to shift companies. Great employees want to work for great companies, so be sure you are branding your company and are known as a great place to work. Do whatever you can think of to assure your valuable resources don’t walk out the door and that you can attract quality hires.

Once you find yourself hiring, take the time to get the right person—the long-term benefits are tremendous. As Jim Collins says in the book Good to Great, it’s all about getting the right people on the bus; so don’t make a rash hiring decision.

Lastly, if you are in the unfortunate position of having to end someone’s employment, be sure you know how to do it right. The above statistics are real, they are big-hitting numbers and they can have tremendous impact on the bottom line.

We know that healthcare reform, as highlighted in this issue, will substantially change the way we do business. It’s our responsibility to stay abreast of the financial impact of these statistics on the organization because, as you can see, it is staggering.

		Julie Mann is the CEO and president of JMann Consulting Group, a Lansing-based human resources consulting firm that works with organizations in all areas of human resources. She brings over 25 years of HR expertise to her clients and is passionate about working with companies and improving their people practices. Mann can be reached at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .