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Hiring good employees is not only important to SMEs (Small and Medium Enterprises) but it’s super essential.
Hiring the wrong candidate can prove to be a costly affair. SMEs usually struggle to decrease the business costs and improve margins.
The importance of hiring good employees is essential for the success of organizations.
In spite of knowing this, the actual cost and impact of poor hiring decisions is often overlooked and underestimated.
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While the obvious costs associated with the hiring process includes, advertising, reviewing CVs, HR admin, the time taken to arrange and conduct interviews, induction and training expenses.
But, there is a huge amount of hidden indirect costs associated to a bad recruitment, which go unnoticed.
Let us have a deep look at 7 costs of bad hiring –
1. Probation costs: It is usually seen that the direct costs associated with a new employee can run to as more than 30% of his annual salary and benefits for the employee.
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2. Productivity: Study reveals that the most productive employee is usually twice as productive as the least productive employee. Thus, each bad hire affects the productivity of the organization negatively.
3. Increased Training Time and cost: A wrong hire reaches minimum productivity requirements in the longest amount of time. High training efforts are required and so is the cost associated with the training of the bad hire.
4. Manager’s coaching time: A lot of manager’s time is often spent bringing one poor employee up to the minimum performance level. The Manager’s time can actually be utilized in bringing several employees to higher productivity levels.
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5. Decreased Turnover: Termination leads to increased workload on all the other employees.
6. Team Morale: If a bad hire is terminated, there’s a disruption among the other employees. Not to mention the increased workload on all the other employees.
7. Loss of sales, poor customer service: In the case of a customer-facing position the sales or customer service may get affected very badly which could further damage the company’s reputation and the brand.
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So we can say that Hiring is a “Pay now or pay later” proposition.
Hiring the wrong candidate can be costly because every employee in an organization has a big impact on performance, company culture and its success.
Organizations, especially SMEs must spend the right time and money in the recruitment process so as save the hidden costs that are running down the employee productivity, turnover, morale and the like.
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