The cost of making wrong hiring decisions is enormous but we still find organisations not paying attention to how they bring in new employees into the organisation. In most businesses, the quality of the people in the organisation is the single most important contributor to business performance more than access to capital and other resources. Look around and look at those organisations not performing and those performing you will realize that the quality employees make a huge difference in performance.
The impact of wrong hires on the business are equally catastrophic. Unsuitable individuals require more supervision and guidance. In some instance, they require additional training to bring them to the minimum level of performance required for the job. One notable trend which we have noticed is that a lot of organisations realise too late that they have the wrong people for the job. In such cases, they try by all means to get rid of the individuals at a huge cost to the business. Here are some of the costs that we have noted: retrenchment costs or compensation for loss of employment according to the Labour Amendment Act. These can run into thousands of dollars depending on level. Over and above these you will have statutory separation payments that may affect the organisation’s cash flow. These days we have also noted huge reputational costs as most of the senior guys will not go down without a fight. There will be legal costs related to fighting the individuals in the courts. The other big part of the costs is the replacements costs which run between 10% to 21% of the individual’s annual salary. Added to this are the costs related work disruptions caused by the departure of the individual. The costs and disruptions cost caused by those thrust into acting positions while these people are on suspension. The overall economic costs are huge.
So what is the way forward for businesses to avoid these costly hiring mistakes? It is important to make the right hiring decisions the first time. The major problem for most business is that they set the barriers to entry into their business too low as a result they get junk. The other problem is that in practices most business overly rely on academic qualification to determine suitability for a job. There is no correlation between the level of academic qualification and performance on the job. As a minimum requirement for certain jobs but academic qualification does not guarantee performance on the job.
Research indicates the following correlations between the following selection methods and performance; work samples(r=0.54), cognitive ability(r=0.51), structured interviews(r=0.51), job knowledge tests (r=0.48), integrity tests(r=0.41) and personality tests- conscientiousness (r=0.31). Given this overwhelming evidence, why do organisations default to invalid and unreliable selection methods? The answer is that corrupt managers want selection methods that they can manipulate to their own advantage. Although the use of the above reliable and valid selection has significantly gone up there are other senior executives who are still against their use for selfish reasons. To address the low uptake of these methods Boards of Directors, especially the HR Committees need to have a keen interest in how employees get in and out of the business. Is it a coincidence that the top 10 performing companies on the stock exchange in terms of share price and profitability all have been and are still using the recommended selection methods above. If you check the bottom performing counters, again, they do not use any of the methods above.
A combination of the above methods gives you the best outcomes. It must always be remembered that the reason for the type of assessment mentioned is to enable your organisation to predict who will perform and who will not before hiring them. That way you reduce the risk of engaging an employee who is unlikely to perform thereby reducing the loss of money through unnecessary training, replacement costs, and general negative business outcomes.
Memory Nguwi. Memory Nguwi is an Occupational Psychologist, Data Scientist, Speaker, & Managing Consultant- Industrial Psychology Consultants (Pvt) Ltd a management and human resources consulting firm. He is the president of the Zimbabwe Psychology Association. He hosts a radio program HR Perspective every Thursday at 1900hrs on Capitalk 100.4FM. https://www.linkedin.com/in/memorynguwi/ Phone 481946-48/481950/2900276/2900966 or email: firstname.lastname@example.org or visit our website at www.ipcconsultants.com