Honeycomb Connect

PEO’s can help small firms with hiring and turnover
April 14, 2005
Texas. -- Small businesses planning to hire this year will need an edge in the battle to find and keep talented employees. Nearly six in 10 (59 percent) small firms plan to add staff in 2005, according to a survey by Administaff, a professional employer organization (PEO) based in Texas.1 The business challenge cited most often is finding the right people for the right jobs. Keeping them is equally important. Because of this 59 percent say they’re making efforts to improve retention.

Given these challenges, thousands of smaller businesses have turned to PEOs for effective ways to find and keep talent. PEOs arm them with recruiting tools and offer a benefits package to attract the best applicants. PEOs also provide a team of certified HR professionals to advise business owners on retention strategies.

Considering the cost of turnover, PEOs’ services are well worth the investment. The cost of turnover to employers in 2004 reached an average of $13,355 per full-time private sector employee replaced, according to an analysis by the Employment Policy Foundation. There are also hidden costs that drive up the cost, such as lower productivity, missed deadlines and lower morale of those who must pick up the slack.

Finding the right people uses assessments instead of ‘gut feeling’

Today’s complex employment realities require an employer use much more than a “gut feeling” about a job candidate. Finding the right people requires pre-employment skill evaluations, background checks and in-depth interviews, all services that PEOs provide. They place ads and screen applicants to find the right ones for the business owner’s consideration. PEOs can also provide sophisticated assessments to match the candidate to the job and uncover relevant personality characteristics.

Assessments help predict job applicants’ success before they’re hired. “Pre-employment assessments can measure such things as integrity, work ethic, job matching, aptitude, abilities, interests, personality and sales skills,” says Sarah Taylor, an account executive and recruiter for Your People Professionals, a PEO based in California. “Screening for integrity is important because people of high integrity tend to be more effective employees and have more job longevity. Businesses using this evaluation have experienced a dramatic decrease of employee theft and dishonesty.”

Identifying the job requirements and compensation package are key to attracting the right person. “When one of our clients wants to fill a position, our first step is to define what they need,” says Mark Trimble, vice president of human resources for Payroll Solutions, a PEO based in Nevada. “We can create the job description and suggest the appropriate compensation package. We select and interview applicants using the job-specific criteria, then present the best candidates to the client.”

Create a community with good communication -- and people will stay

The most successful small businesses retain their talented employees by creating a family-like community, according to recent study by Cornell University in conjunction with a leading PEO. They promote a culture of trust based on clear communications about performance standards, expected workplace behavior, the management’s values and beliefs, and the true value of their benefits package. They also promote a safe, healthy workplace along with opportunities for professional development.

While the business owner focuses on the revenue-producing activities, the PEO focuses on the communication aspects that are critical to retaining employees. “PEOs can help companies provide clear communication to their employees, from the moment they are recruited and into their day-to-day work life,” says Natalie Rhoden, director of marketing communications for Doherty Employment Group, based in Minnesota. “The PEO helps the company develop and deliver the written job offer, detailed job descriptions, employee handbooks, compensation statements and descriptions of the company culture. Studies show that when employees know what is going on in their company, they stay longer.”

PEOs also work with business owners to resolve employee situations that could disrupt the workplace and lead to turnover. They provide training and coaching on how to resolve employee conflicts and accusations of harassment. They also deliver an extra level of confidentiality appreciated by both the employees and the business owners. “When there is an issue, our PEO gives it a level of discreteness and confidentiality that’s hard to maintain when the issue is handled in-house,” says Lisa Wise, operations manager for Compass Point Retirement Planning in Massachusetts. “That makes for a better workplace.” Her company works with Integrated Staffing, a Massachusetts-based PEO.

Knowledge about the reasons people leave helps business owners understand what will make them stay. Checks & Balances, a Virginia-based PEO, does turnover analyses for management. “Through such studies we determine key metrics for retention by analyzing reasons for leaving and the correlations to such factors as length of service and position,” says Nancy Zsebo, the company’s executive vice president, human resources. “These tools help direct company funds towards workforce development and growth instead of continual search and entry-level training.”