Importance of Hiring a Right Candidate to Reduce Costs

Published by MBA Skool Team, Published on November 11, 2016

About an year back according to a statement given by SHRM India CEO Anchal Khanna “ The present and the future of any company depends on the employees of the company if a wrong candidate is hired the company have to bear high cost which can be 5 times the annual salary of the wrong(bad) hire. In a research of Harvard Business school review it was found that companies’ takes time to decide the candidates for hiring because the cost of wrong hires which a company will pay is 80% of the employees’ turnover, which can cost thousand or million dollar to a company.

The cost of wrong hiring varies from companies to companies because of the variables. For a manufacturing company the labour cost of wrong hiring and replacement is one third of the employees’ turnover. SHRM found that this cost goes even higher to the 5 times of the employees’ turnover and the cost replacing an employee at the higher position with long term experience is much higher. Recruiters say that if a company has hired a wrong candidate they must find it out with in the six months of the hiring the candidate must be replaced because this whole process of rehiring will cost the company two and half times the cost of the employees annual salary in general.

Image: pixabay

Why this cost of the hiring and rehiring is high? There could be many reasons for it. If an employee is hired cost associated with the process is started from the travel expenses, accommodations (hotels), food which is implicated for all the candidates called for the interview. The employee who is hired employee testing, training and induction and termination costs, unemployment reimbursement and reallocation costs are associated. Apart from all of these when an employee is terminated for not being efficient doing their job there is turmoil among the other employees about the scenario, this will reduce the efficiency making it another addition to “the cost of the bad hiring”.

A lot of strategies are made and there is a long process of hiring in many companies still 95% of the companies’ do wrong hiring every year from the research report of the Glassdoor management consultancy of the Brandon Hall Group. “Wrong hiring is associated with the misfit”. Misfit can be explained as the impact on the productivity, performance and culture. The reasons behind started with the very first question being asked by the employer. It was found that very first fault started with the process of the interview itself; in most of the companies there is no standard protocol of conducting interviews, what are Do’s and Don’ts of the interview. So, it quite obvious that the hiring team asks the wrong questions which is not aligned with the needs of the post and culture of the company.

It is important to know exact job requirement what are the technical skills and the personality characteristics of the positions. Recruiters must see that what skills candidates are bringing to them. Their personality traits and culture of the company and team work effort must be aligned.

Retention and the productivity of the candidate also depend on the orientation process of the companies. It is the duty of the mentors and trainers to take care that the new candidate must be trained properly in terms of skill and culture as per the job specifications. So, the Onboarding process of the companies also plays an important role in the productivity of the candidates making them acquainted with the culture of the company.

How to hire the right candidate for the job?? This is the most important question to avoid all those inconvenience arises by hiring a bad candidate. First thing is to know the definition of the job description. Recruiters must know that what kind of skills they are looking for. Skills here describe all technical and analytical skill required for the position. Secondly, all intangible traits must also been taken care of. Candidates’ personality and his ability to cope up with the external environment of the organisations and culture must be observed. Thirdly, the most important step to attract the best candidate is making a good brand image, candidates with the best and multiple skills will have the lot of opportunity to join best company which takes his career the right direction. So, company must have that brand image to attract the best talents.

Hiring the right candidates will help the company to grow and succeed, also in long term it will help in brand building. The key characteristic of recruiting the candidate is to have patience, make a proper planning to build your team any short cuts not only end up with inefficient team but also affects the productivity and ultimately the brand image of the company.


This article has been authored by Simmy Nigam from IIM Raipur

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