Tag Archives: hiring practices

4 Keys to Competitiveness in the New Economy

This post is the first of a four-part series.

Ask any business owner today how the marketplace has treated them the last few years, and you’ll hear a recurring theme: “It’s been hard.” But some have learned how to improve their risk management and shore up several facets of their business where profit leaks can occur. You can explore your own vulnerabilities to claims and correct them by following a system known as “PX4.”

The 4 P’s are:

1. Pre-Hire : What does your hiring process look like?

2. Post-Offer: What should you be doing after you’ve offered someone a job?

3. Pre-Claim: What policies and procedures do you have in place before you have your next loss (whether via workers’ compensation or something else)?

4. Post-Claim: What systems do you have in place to keep yourself and the insurance carriers from losing money because of things you let fall through the cracks?

We’ll cover the first P in this article, then discuss each of the other three in subsequent pieces, as we cover the concept of TCOR (Total Cost of Risk) and lay out tools you can use to streamline and organize various aspects of your business, such as training and claims management. Our goal is for you to take away several insights that could save your company hundreds of thousands of dollars or maybe even millions of dollars in lost profits and revenues.

Pre-Hire

If you’ve had to deal with an employee lawsuit in the past few years, you know they’re frustrating and lead to a major loss of profits. Lawsuits can come from many issues; for this series, we’ll cover lawsuits coming from EEOC issues or workers’ compensation claims.

In the last 10 years, the settlement costs of lawsuits have risen to more than $310,000. If you were sued by one of your employees, and the settlement was a mere $15,000, how much do you think that would cost your company? Would you be surprised to learn a claim like that would cost your company more than $50,000? If your profit margins were 4%, it would take you $1,250,000 in additional sales to make up for that loss.

Reducing your risk is critical to your bottom line. Business risk can take many forms, such as:

1. Financial Risk: Asset price volatility (currency, interest rates, material and labor costs)

2. Operational Risk: Efficiency, productivity, etc.

3. Hazard Risk: Lawsuits, insurance claims (workers’ comp, general liability, fire, etc.)

Of those three areas, companies are surprised to learn that operational risk is the costliest to companies. Although hazard risks are expensive, they can be transferred through the purchase of insurance policies.

To reduce your risk, you must begin with an assessment of your hiring practices. Do you feel like you have a watertight system in place, or have you gotten rusty because you’ve not been doing a lot of hiring in the past several years? Do you feel you’re using good employment applications and asking appropriate questions?

What successful companies realize is that the effectiveness of their hiring can be a great indicator for profitability in the future. Studies have shown that hiring the wrong person can be very costly, and not only from the loss of productivity or from having to find a replacement; bad hires can be fertile ground for workers’ compensation claims.

To avoid bad hires, it is always wise to request a Motor Vehicle Report on potential hires from a vendor who specializes in that service. A couple of good sources are the Insurance Information Exchange (www.iix.com) or LexisNexis Employment Screening (www.screennow.com).

You may also want to consider conducting a personality profile to make sure you don’t hire the proverbial “dog that can point but that can’t hunt”—someone who can tell you exactly what you want to hear but who isn’t a good fit for your company. Predictive Results (www.predictiveresults.com) and Zero Risk HR (www.zeroriskhr.com) are two companies that specialize in personality profiles; they claim a 96% success rate in helping you make sure you’re hiring the best person.

Back ground checks have become a routine part of the pre-hire process these days. You can contact First Advantage (www.FADV.com), Edge Information Management (www.edgeinformation.com) or National Crime Search (www.nationalcrimesearch.com ) for this important process.

Getting the Pre-Hire process right will get you moving in the right direction but is just the start. In our next post, we’ll look at the second part of the “PX4” plan – The Post –Offer process. 

Want To Know Where You Could Be Losing Profits?

This is the second article in a five-part series on risk management. Additional articles in this series can be found here: Part 1, Part 3, Part 4, and Part 5.

Has your company had to deal with an employee lawsuit in the past few years?

If you have, you know they are frustrating and costly, and are a major loss of profits when they occur. Lawsuits can come from many issues. For this series, we'll reference lawsuits coming from Equal Employment Opportunity Commission issues or Workers' Compensation claims.

You first need to understand an underlying principle that reducing your business risk as a company is critical to your company's bottom line. If you reduce your risk, you will in turn help to increase your profitability as a company. Business risk can take on many forms such as:

  1. Financial Risk: Asset price volatility (currency, interest rates, material & labor costs)
  2. Operational Risk: Efficiency / productivity
  3. Hazard Risk: Lawsuits, Insurance Claims (Work Comp, General liability, Fire)

In the last 10 years, the settlement costs of lawsuits have risen to over $310,000. If you were sued by one of your employees, and the settlement was a mere $15,000, how much do you think that would cost your company? Would you be surprised to learn a claim like that would cost your company over $50,000? If your profit margins in this example were 4%, it would take you $1,250,000 in additional sales to make up for that loss.

To better understand how risk impacts your bottom line, you need to know about the study of Total Cost of Risk (TCOR) which we will discuss later in this series.

In our previous article, we referenced a system for increasing your profitability called the “4P” plan. The first section of this plan is called the “Pre-Hire” process. It begins with an assessment of your hiring practices. What does your hiring process look like these days? Do you feel like you have a good water tight system in place for the hiring of new employees, or have you gotten rusty since you’ve not been doing a lot of hiring in the past several years? Do you feel like you’re using good employment applications and asking appropriate questions?

What successful companies have come to realize is how effective you are in your hiring process can be a great indicator for your profitability in the future. It always pays to hire “good” people. Studies have shown that hiring the “wrong” person can be very costly in the loss of productivity from having to find someone new to take their place and can be fertile ground for higher Workers’ Compensation claims when they occur.

In the Pre-Hire process, it is always wise to request a Motor Vehicle Report (MVR) on your potential candidates from a vendor who specializes in that service. A couple good sources for this are the Insurance Information Exchange or LexisNexis Employment Screening.

You may also want to consider having a Personality Profile processed for your potential candidates to help ensure you’re hiring the “right” person for the job. Predictive Results and Zero Risk HR are two companies that specialize in this area and report a 96% success rate in helping you make sure you’re hiring the best person for the position. Many people have hired the proverbial “dog that can point that can’t hunt”. I trust you know who those people are: they tell you exactly what you want to hear, but are just not a good fit for your company.

Background checks have become a routine part of the pre-hire process these days. You can reach out to First Advantage, Edge Information Management or National Crime Search as options for this important process.

In our next article in this series, we’ll look at the second part of the “4P” plan — The Post–Offer process and it’s importance to your profitability.