The Cost of hiring the wrong employee

India is number 4 in the world when weighing companies that make wrong hiring decisions. And, according to a survey, three out of ten Indian companies, i.e., 29%, reported that even one bad hire cost companies and employers an average of over INR 20 lakhs.

In today’s competitive era, every organization is trying to get an edge over the competition, be it at technological advancements, ease of employment or activities of human resources. It is a known fact that most major organizations have what can only be described as an annual mass employment drive, which on the face of it, may sound good but isn’t so. With a mass recruitment drive as a hiring process, comes an increase in the probability of hiring one or more employees that may turn out to be a misfit in the organization.

India is number 4 in the world when weighing companies that make wrong hiring decisions. And, according to a survey, three out of ten Indian companies, i.e., 29%, reported that even one bad hire cost companies and employers an average of over INR 20 lakhs. The study also states that 84% of companies in India said that they were greatly affected by their bad hiring choices. For bad human resources’ decisions, Russia seems to be leading with Brazil, China, India and the USA following closely. Let us, therefore, take a detailed look at the real cost of hiring the wrong employee.

Cost of hire

Finding the right candidate(s) for your organization is not an easy task and it is certainly not cheap. Apart from monthly salary outgoings, a bad hire also incurs additional costs in terms of resources, time and energy. Right from the human resources’ department posting the job advertisement, either on a website, newspaper or by seeking the help of a recruitment agency, the hiring process comes with a price tag. Finally, the activity of hiring resources only to end up letting them go because they could not match the expectations causes a significant drain of company costs.

Cost of training

It is mere speculation that a new employee will not be as productive as the one he/she is replacing and may or may not produce the revenue expected. The new employee may be just as good or better. However, with a new hire, comes the added expenditure of training, which would require investing manpower and resources in training the newbie. Considering these costs, the department of human resources is usually under tremendous pressure to find the candidate most suitable for the given role, so as to avoid training yet another recruit all over.

Cost of productivity loss

The hiring process is a critical one, so keep this in mind. A wrong hire typically resists and resents all or most employee engagement initiatives that the human resources team set. They usually don’t take an interest in things like upskilling, teamwork, performance alignment or other such activities. They could also make it difficult for his/her team to work and deliver as one unit, and create challenges for other teams if they must interact daily. This affects the time and energy of the company, resulting in productivity loss and incurring grave costs.

Cost of motivation loss

Investing time, effort, energy, and resources for a bad hire is discouraging as it can affect internal and external team dynamics significantly. This can especially happen if this hire is recruited for a senior or managerial position. Eventually, high performers may lose faith in the employer and the organization’s management, leading to a display of dissatisfaction and indifference. This, further, fosters negativity, affecting the morale and work environment in general. The cost of the entire organization or even a single team losing motivation comes is extremely high as it greatly impacts and halts productivity.

Cost of reputation loss

In today’s age of social media, it is easy for job seekers to look up verified employee-ratings regarding the professional ethics and work culture of a company before even considering to join it. Hiring the wrong person can cause discontentment among team members, leading to high attrition. This bad hire may cause conflict or disappointment, which can convert to bad ratings for the company. Once the reputation of an organization is tarnished, correcting perceptions or managing reputation through social media and PR activities can be a strenuous task. Stakeholders, partners and external agencies will slowly begin to feel betrayed, thus, shaking their trust in the management. It will seem that the company or its leadership does not really care for its quality or the conflicts that have been rising within. Individuals/other candidates then end up distancing themselves from companies such as these. Human resources, must, therefore, ensure that they are very certain to chalk out the hiring process to be foolproof so that the company’s reputation remains intact.

The lasting implications

If an employee parts with an organization prematurely, it can cost the organization a significant amount of monetary and reputation loss. Many companies across the globe are realizing this and strategically plan employee engagement activities to keep their employees happy. Organizations and human resources come up with employee-friendly schemes and policies, which they hope, will help the company retain its employees. Organizations have begun to realize that leaving a post vacant for too long not only costs the organization revenue but also causes negative publicity about the organization, as questions such as, “why is the post vacant for so long?” are bound to arise. Thus, causing negative publicity.

Employers and human resources must be extra careful when going through the hiring process. They must shortlist the right candidates, ensuring adequate filters that can help to identify and reject a possible misfit for the position and company. The job market is known for being ultra-competitive, and it is easy to get carried away by hiring wrong candidates, something that even the most experienced recruiters and organizations have fallen prey to, at some point. While there is no bulletproof method or technique to prevent you from employing the wrong candidate, by taking into consideration some of the above-mentioned factors, you can keep your organization a little more protected by ensuring the right strategies for hiring and employee engagement.

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