Then we discussed as to why we both believed in the same thing from our experiences in the past. We came to the conclusion that the actual reason behind this was hiring the wrong employee. Cost of wrong hiring always impacts the bottom line of the company.
“As a business owner or manager, you know that hiring the wrong person is the most costly mistake you can make”. – Brian Tracy
There’s a purpose why companies take their time selecting a suitable candidate for a position. It’s because hiring a wrong employee has so many negative implications that go beyond monetary damage.
Here, I would like to share my experience about how hiring a wrong employee could spell doom for a company in 4 different ways
- Experience of Customers: A good employee always increases your top line but think what would happen if our wrong hiring met with our customers. Such employees are mostly never serious about their job responsibilities, and are always looking for shortcuts and disappointing customers due to lack of client servicing skills. One negative interaction will not only create client dissatisfaction but also hamper the company brand name especially in the minds of new customers, and eventually by word of mouth publicity.
- Increase Financial Cost to the company: Though the unemployment rate is high in India, a company is unable to find the right candidate for the right job after spending 2-3 months on the same. They have spent lots of time and money in recruitment and training. In fact, studies show that the actual cost of hiring a new employee, in terms of time and money, could be more than 50% of a person’s salary.
The financial costs of hiring an unsuitable egg can include:
- Time spent on the Recruitment Process
- Recruitment, advertising, and external placement consultation fees
- Salary payments (yes, even if your new employee isn’t an ideal fit, you still have to pay them for their time)
- Education and training for a new employee
- Costs to rehire a suitable employee
- Decrease in Productivity: In a general scenario, people seem to be more intelligent on their Resume than actually in person. What happens if you hired this type of people? The rest of the team will have to pay for it with extra efforts. That will impact their productivities. Morale will suffer, standards will drop to the lowest denominator, and eventually great employees will quit.
- Increase in Employee Turnover: Every organization wants an employee like Virat Kohli who can run the company’s turnover like a booming market. Where there are good employees, there are unproductive ones as well. There is one thing that good employees can’t stand and that is having incompetent, unproductive employees as their colleagues or managers. So how do great employees react to such incompetent employees? Well, they simply quit.
Hence, the Selection Process is the key to success for any organization. 95 % success of any enterprise is determined by the people chosen to work in the enterprise.
According to Brian Tracy, “Cost of wrong hiring is between 3 to 6 times the individual annual salary to hire someone and then lose them when they don’t work out”. These are just the actual financial costs. This is why companies that have a high rate of employee turnover are almost invariably low-profit companies. The most profit making companies have employee turnover rates as low as 1-2 % per year.
Even if you are in a hurry to find the right person and get someone into that job, practice what William Shakespeare once said, “Make haste slowly“.
There are 5 tried and tested ways whereby this situation could be dealt with, mentioned as under.
- Employee Prototype : Setting an example of an ideal/productive employee for a particular job role right from the qualities required to the job skills required for that particular role for better results.
- Provide Incentives : Provide an incentive to existing employees for job profile references.
- Consulting Agencies : Build a solid rapport with those hiring and consulting agencies which understand the organisation’s culture, work ethic better, and most importantly they can understand the company’s hiring requirements for open job positions. This would be of great help as these agencies have big networks and good contacts as well, which would prove to be a handy solution.
- Brand Building : There is nothing like building and sustaining a solid brand name in the market as this would attract the right, productive, efficient prospects automatically.
- Stringent HR Policies : Also having strong, transparent HR policies would help in shortlisting profiles better, getting reference checks done in a systematic, harmonious way. This initial screening/clearance process, if done well would make life easier for the respective department job opening to have filtered prospects and eventually help hire a suitable candidate for a particular job position.
Staffing is therefore a key management function for any business. Choose wisely for desired results.