When hiring decisions go bad - SCMpro Magazine March 2013

When hiring decisions go bad - SCMpro Magazine March 2013

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  n analysis n Practice n knowledge n Survey n human resource When Hiring Decisions Ba d G o Making a wrong hiring decision costs money. Its not just a business issue but an economic one too, writes Darryl Judd. SCMPr March 2013 47
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  talent J ust as employing the right The survey pointed out that “Soft” Costs of Turnover person can drive company bad hires are those who lack qual- n Lost expertise. performance, so it is true ity, sincerity and understanding of n issed deadlines M and disrup- that conversely a bad hire the job. They can carry negative tions to workflow. decision can cost companies attitudes and are not team play- n ncreased absenteeism due to I significantly. ers. “They often reported deadline stress. As the pressure and urgency failures, and post-sales complaints n ecreased productivity or cus- D to place roles quickly increases were common around them,” said tomer service. to meet business demands the the study. n educed morale, which may R risk of poor process such as: poor On a macro level, the cost of cause remaining employees to screening, rushed interviews and staff turnover is an important express a desire to leave the or- lack of proper reference checking economic issue, not just a com- ganization. can contribute to the wrong hire pany related one. The widespread decision. impact on the Indian economy Recognising the Problem As a recent survey in India dem- through the loss of productivity Unfortunately, many companies onstrated, hiring is a costly affair and company performance sig- do not recognize the problem, and bad hiring is costlier. nificantly affects domestic and nor do they see the cost of turn- Undertaken in 2012, across international business output over as a major problem. A fur- over 8000 companies, the survey damping GDP. In turn, this af- ther survey in the US in 2012, found that Indian firms are esti- fects impacts on the ability of found that 50 per cent of organ- mated to have lost at least `2,460 companies and the government izations have a process in place crore in bad hiring in 2012. In to further invest in growing im- to properly calculate turnover the pan-India survey about 89 portant parts of Indian’s economy costs, its a classic example that per cent of respondents admitted to the benefit of all. you cannot fix what you cannot they suffer from decisions to in- measure. In India, the increas- duct “unfit” and “un-trainable” The true cost of turnover ing cost of turnover is largely talent. Some 11 per cent said It is estimated that the cost of underestimated and deemed to they make cautious hiring deci- employee turnover can range be an “unavoidable” cost of do- sions and therefore, losses were from 40-200 per cent of an em- ing business in a challenging negligible. ployee’s annual salary. The total marketplace. The high financial cost of em- cost of turnover includes money, ployee turnover, regardless of the time and other hidden or “soft” level of wages being paid to the costs, which when combined, departing or incoming employ- are often much more substantial ees, makes a bad hire decision not than expected. only costly to the business, but a negative influence on staff moral “Hard” Costs of Turnover resulting in a decrease productiv- n dministration A costs for ity and even higher turnover. leavers: exit interviews, payroll “Ineffective Further to this, Companies said changes, etc. recruitment processes, bad hiring impacted their produc- n overing a vacancy with temp- C tivity (22 per cent), lost time in workers or overtime. poor interviewing techniques hiring and training (21 per cent), n ecruitment and selection costs: R and a failure to undertake lost money in hiring and training advertising the vacancy, review- through background checking (19 per cent), brought employee ing applications, conducting in- morale down (17 per cent), nega- terviews, etc. is costing organisations more tively impacted clients (13 per n n-boarding new hires: induc- O than just lost time, valuable cent) and negatively impacted sales tion, training, etc. profits are being wasted.” (8 per cent). n Severance pay. 48 SCMPr March 2013
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  talent Whilst it is true that some de- Having solid governance mech- teams are well training and able to gree of turnover is inevitable, and anisms in your selection process invest in solid HR systems are fur- may even be advantageous, attract- including the use of Competency- ther ways to mitigating risk. ing and retaining top talent is the Based Behavioural Interview tech- As one Indian CEO pointed goal of every CEO, while replacing niques, behavioural testing and out in Indian hiring survey, “In- under-performers. Managers who stringent background checks can dividual companies have to take are conscious of the rate and cost of significantly bring down the quan- responsibility for bad hiring deci- turnover in their organisations are tum of bad hiring decisions made. sions. Recruitment managers are much better positioned to control With increasing use of fake often under pressure to acquire these costs. identities and resume fraud being cheap talent. So to save, say 5 per undertaken, ensuring hiring teams cent in the short term, companies Take Control of Turnover have the resources to be able to end up losing about 10 per cent Costs in Your Organization undertake 3rd party background or more in the long term. It’s a A Harvard University study found reference checking has never been typical India scene, globally things that 80 per cent of employee turn- more important. are different and it is this that over stems from mistakes made Partnering with globally rec- must change.’’ during the hiring process. It’s all ognised Recruitment Partners, about prevention and ensuring we whereby benefits such as testing Darryl Judd pay suitable attention before mak- and extending guarantees are of- COO, Logistics Executive ing the hiring decision. fered and ensuing your HR Hiring [email protected] www.scmp.in ...think supply chain Industry Portal for the Supply Chain Professional SCMPr March 2013 49