The Cost of a Bad Hire

    

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In my last article, I had written about Employee Engagement activity. How we can do and what is important! After reading that article one of my clients shared his experience. First and foremost he appreciated my article. He also informs me that whatever you said that is right. A also believe in employee engagement activities. But after doing this also employees are not engaged. They are quitting the job. What is the reason?

Then we discussed their experiences why they believe so. We came to the conclusion that the reason behind this is the Wrong hiring decision. Cost of wrong hiring always impacts on 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 sweet time selecting an apt candidate for a position. It’s because a bad hire has so many negative implications that go beyond monetary damage.

Here, I like to share my experience and researches culled, about how a bad hire can result in costing a company:

1. Experience of Customers: Good Employee always increase your top line but think what will happen if our bad hiring met with customers. Bad hires never serious for their job responsibilities, and even if they can, are always looking for shortcuts, or making customers disappointed due to their lack of customer service. Keeping existing customers or the cost of gaining a new customer both are more expensive. One negative interaction with a bad hire may cause that not only to that customer to walk away but also it will create a negative impact on new customers by word of mouth publicity. Eventually, your brand and reputation will suffer.

2. Financial Cost: Though the unemployment rate is high in India still, the company is not able to find the candidate after spending 2-3 month also. They have spent lots of time and money in recruiting and training. In fact, studies show the real cost of a new hire, in terms of time and money, can be more than 50% of a person’s salary.

The financial costs of hiring a bad (or unsuitable) egg can include:

•        Time Spent on the recruitment process
•         Recruitment advertising and external placement consultant fees
•         Salary payments (yes, even if your new employee isn’t a great fit, you still have to pay them for their time)
•        Education and training for a new employee
•        Costs to rehire

3. Decrease Productivity: In a general scenario, people are more intelligent on the resume then they are at actual. What happens if you hired this type of people? The rest of the team could be the one who has to pay it with extra efforts. That will impact on the productivities.  Morale will suffer, standards will drop to the lowest denominator, and eventually, great employees will quit.

4. Increased 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, bad are also there. There’s one thing which good employees can’t stand – that is having bad employees as their colleagues or managers. So how do great employees react to bad hires? Well, they simply quit.

Hence, the selection process is the key to success for any organization. 95% of the 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 the just actual financial costs. This is why companies that have a high rate of turnover are almost invariably low-profit companies. The companies that are the most profitable have turnover rates that are as low as 1 % or 2% per year.

Even if you are in a hurry to find the right person and get someone into that job, practice what Shakespeare said, "Make haste slowly".