Check out Appendix III, "The Cost of a Mishire: The Story of the Bad Controller." I won't spoil the plot by telling you how much this controller cost the company, but I think you will be astounded. Even with these dramatic costs, I've even been told by many that my estimated costs are conservative.

After all, consider the areas that are affected by a mishire:

And those hard costs don't even address the mistakes, failures, and missed or wasted business opportunities:

Occasionally when I walk clients through the MATCH process, their reaction is, "Wow, looks painful." They see all the steps and little details that one must attend to and wonder if they have enough time, resources, and energy to work the process correctly. But the fact is, if you hurry the process and don't hire correctly the first time, you're just going to have to do it again and again—until you either get very lucky or learn your lesson. And in the meantime, you'll be draining your company not only of money, but also morale.

Increased revenue is the easiest way to measure hiring ROI. The impact of a new hire can be calculated by establishing an objective measurable baseline and then noting bottom-line improvements over time. This is easy to analyze when you've hired a salesperson or an executive with leadership responsibilities, more difficult when reviewing results achieved by an accountant, or an administrative assistant, or an information technology (IT) manager. However, both the company and the employee benefit by evaluating the ROI of every hire.

A simple way to establish a baseline is through the concept of revenue per employee (RPE). RPE can be calculated with the following simple formula:

Suppose that a company of 312 employees has revenues of $50 million. You calculate RPE by dividing $50 million by 312, which is $160,256. This figure then becomes the baseline for evaluating the impact of a new hire. Companies can improve RPE by either increasing revenue or decreasing the number of employees (thereby increasing efficiency). Following are three real-life instances where nonmanagers were tasked with impacting the RPE and how the impact was measured.

By improving an existing web site, the web site developer was able to increase traffic, directly affecting return traffic and time on site. These metrics were compared to a baseline taken on the web site developer's start date and compared on a quarterly basis. The most critical metric for evaluating the web developer's ROI was increased sales through the web site improvements. Complications did arise because the improvement of the web site was shared by the marketing team, and sales were impacted by the sales team; however, there was a clear correlation to the web improvements and increased sales, which impacted the RPE and therefore the hiring ROI.

By setting a goal of decreasing the number of bad emails in an email marketing campaign, the database manager was able to increase the number of sales leads, which led to one additional sale per quarter. By tracking sales leads that came from emails, which had been corrected through a research process, the database manager was able to correlate an improved RPE to her direct actions.

Collections were not a priority when the office manager joined the company. Sales were good, but there was not enough money in the bank. The office manager was tasked with reducing the number of Days Sales Outstanding (DSO). By improving the collections process the office manager was able to clearly establish an excellent ROI by directly affecting the cash accessible at any given time—this in turn affected the overall RPE of the company.

The most difficult area to measure is the influence that a new hire has on the organization's culture. I'll turn to sports to illustrate a positive correlation. In 1995, my hometown baseball team the Atlanta Braves, were struggling. To try to turn things around, they brought in a veteran first baseman named Fred McGriff.

A fire broke out in the clubhouse the day McGriff joined the team—which turned out to be a metaphor for how McGriff would help to ignite the Braves. His mature, self-effacing, quiet style seemed to be just what the team needed. The more they won, the bigger each game got; and the bigger the game, the more pressure the team faced. McGriff's easy going personality helped the team stay relaxed and focused even as the intensity of their circumstances increased. The Braves went on to win not only the division, but also the World Series.

McGriff didn't win games single-handedly, of course. Though he played very well, it wasn't just his ability that clinched the championship for the Braves. It was how the rest of the team responded to his presence. Truly, his impact couldn't be calculated with runs batted in, home runs, or any other statistic. But the effect that McGriff had on the Braves organization is undeniable.

Organizations must strive in a similar way to understand the impact that employees have on company morale and spirit. I've seen several great companies who have linchpins like Fred McGriff in every position—from administrative assistants to presidents and CEOs. While company leaders must have the capacity to transform the organization, don't underestimate or ignore the capacity of every team member to create a positive cultural dynamic.

To measure this cultural dynamic, the hiring team should challenge themselves to discuss the impact of the new employee. In follow-up meetings, the team should question the effect that the new hire has had on the team. While this is a very difficult area to directly measure, discussion on the topic will help the organization to better understand the importance of this aspect of hiring ROI.

In addition, you might wish to survey your employees on their job satisfaction once a year and compare results from quarter to quarter. As we discussed in the chapter on retention, workers who feel good about their work are more likely to offer their creativity—which, in the knowledge economy, translates directly to competitive advantage.

There's one more concept to keep in mind as you are working to establish hiring ROI: hiring the best candidate available for the money. Unless you have unlimited funds, you will almost always have to compromise your search. So understand that the "right" hire isn't simply the best candidate out there; it's the best person available for the salary you can afford.

If you are a small company, you likely cannot employ a controller at a price tag of $200,000 annually. Your perfect controller may be at $75,000—certainly a different set of skills, experiences, and image, but nonetheless, the right controller for you at this time.

Should your company grow, the controller who was the right fit at one time may no longer be capable of the job. At that point, the organization will have to conduct a new search for the best candidate available for the money.

I was recently impressed by a story in which an analyst developed a process that allowed her organization to use Excel in streamlining a process. This improvement took a three-day ordeal and compressed it to less than five minutes. The employee's manager calculated the hourly savings to the company and gave her a spot bonus based on a percentage of the savings.

Certainly, I was impressed with this analyst's creativity and know-how. But I was further impressed that her company recognized the contribution and quickly compensated inventive thinking. It is no surprise that her company is wildly successful. By consistently recognizing and appreciating innovative ways to save money, the company is developing a culture of ROI appreciation.

How can you instill a greater appreciation of ROI in your company?