Wrong hire Costs- not just in Exit, but also in Existence

Right Person – Fundamental Strategic Factor

Strategy or no strategy, technology or no technology, the fundamental factor for sustained business success is finding the right people, where having the right human resource is a multiplier, and the wrong resource a divider.

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Talent management and employee retention are now of paramount focus for organisations and rightfully so. Increasingly, it is about organisation’s ability to spot, attract, and nurture talent, and ability to create human resonance (via best alignment between an employee’s talent and the role requirement), which will be the organisation’s differentiator and decider for outstanding success. It is going to be less and less about knowledge, capital, or even technology.

Attrition not only costs an organisation in monetary terms but also impacts aspects like:

·??????The pace of progress due to the loss of continuity of efforts on the job

·??????Customer goodwill, again due to discontinuity of the person serving the customer

·??????An overall sense of internal stability and morale among those who choose to remain

·??????Reputation in the employment market if attrition is too high or sustained?

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Although no organisation wants to lose people for right or wrong reasons, zero attrition is neither practically possible nor is it desirable, either quantitatively or qualitatively.

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Attrition can be of two types: Desirable and Undesirable. The root causes of these two are very different. Undesirable attrition has its roots in the organisation’s inability to retain good people, hence the remedy for it is the strengthening engagement initiatives. Desirable attrition is due to an organisation’s inability to select right, the solution being to strengthen its selection processes and sourcing.

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Though Undesirable, Wrong Hiring is a Reality

Nobody wishes or consciously recruits a wrong hire,?the realisation that it was a wrong hire comes only retrospectively. Nonetheless, wrong hires are a reality in most organisations. While in the long run organisations and teams need to learn how to minimise their percentage of wrong hires, in the immediate term the best option of dealing with a wrong hire is to plan an exit as soon as it is discovered.

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Like any attrition, a wrong hire cost includes the expenses for its replacement (Cost of Exit), but more importantly, unlike other attrition, a wrong hire has a substantial cost while in employment as well (Cost of Existence). Broadly speaking, exit costs should be the focus for undesirable attrition, whereas existence cost is the main issue for desirable attrition or wrong hire.?

Wrong Hires Cost More in Existence than in Exit

There has been extensive research and other accounts of estimation of cost of attrition or replacement cost on different components such as recruitment, induction, training, initial warm-up time, employee morale, company image, cost of discontinuity, etc. Much has been written about the cost of replacement, to the extent of virtually missing out on an equally potent cost component which is the ‘cost of existence’ of a wrong hire.

Every additional day of a wrong hire in a job costs an organisation immensely in myriad ways such as:

• Absorption: Since the alignment of employee inclination and role requirement?is low, uptake is both reduced and slow. This impacts the time required for getting up to speed, and the quality of output, eventually affecting productivity.
• Training:?Due to low inclination, the efficacy of training is low. The gain from training costs is questionable.
• Productivity: Due to a poor fit between role requirement and employee talent, work output is low, both in terms of quantity and quality.
• Substitution: As the work output is below desired levels, it calls for substantial?efforts from the supervisor in following up. The employee unfairly draws much management resource, time, and energy, which otherwise could be redeployed in more gainful ways.
• Organisational momentum: One person operating below par does not just affect his/her team but instead results in a chain reaction - most of the organisation, at all levels, starts operating at one level below its capacity. Beyond work output, it saps the organisation of its vital vibrance and energy.
• A rotten mango: Just like one rotten mango can spoil the entire heap of otherwise healthy mangoes, just one sustained non-performer is enough to psychologically affect performance levels all around. Everybody starts to ask, “Why should I?”?
• Negativity: All negative or below par things have a gravity ( pull down )?effect on the organisation. This is indirect negativity. However, non-performers have a far greater tendency to add direct negativity by spreading their frustrations and depressions and they can harm the organisation immensely.

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The Solution Lies in Right Selection

The process of right selection is undoubtedly one of the biggest challenges that companies face, and it has a great impact on business decisions at the same time. Getting it right the first time helps avoid costly and time-consuming repercussions and has a positive impact on employee morale, thus eventually impacting productivity & hence profitability

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We need to realise that while knowledge and skills are required, they can be imparted from outside, whereas talent or constitution can’t be imparted – these are the aspects a candidate intrinsically brings with him/herself.

Hence it is not necessary that we need to select the most intelligent, the most knowledgeable, or the most skilled individual, but instead pick someone who is constitutionally the most right. No amount of training or hard work can transform a wrong person into the right one, as right training at its best can make a donkey , a better donkey but can’t transform it into a horse.

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Therefore, hiring is undoubtedly one of the biggest challenges that companies face. Getting it right the first time allows the company to maximise their time, money, and impact on employee