Why The Cost Of Underperforming Employees Is So Astronomical

A culture of underperformance can be insidious, culminating over time and making the pain points difficult to identify and combat. A problem that is so pervasive by nature, often only becomes evident in the wake of increasingly competitive markets, or when new leadership comes on board and inherits the issue.

There are several reasons why companies fail to deal with problematic employees promptly. Perhaps those underperforming have been in the business for a long time. Maybe they possess a great deal of accumulated knowledge and have somehow managed to forge good relationships with certain managers and stakeholders.

There is also the common fear felt by management around bringing new people into a business, despite wanting, in theory, to recruit higher performers. Is it better to stick with the devil you know or the devil you don’t? It poses a gamble many take on reluctantly at best.

Recruitment is a timely and costly investment. In 2017, Smart Company reported that the cost of replacing someone “can be upwards of 50 percent of a person’s salary”. But the continued loss of productivity, even from one individual, comes at a significantly greater loss. A 2017 survey-derived CVCheck report revealed underperforming staff can cost a business up to “400 percent of the employee’s annual salary”, highlighting the astronomical impact poor performance can have on a business’s bottom line.

Further, when it comes to labour-intensive industries, such as manufacturing, warehousing and trades, the day-to-day impact of lost productivity is ever more critical. So how do you protect the business bottom line from incompetence? And how do you prevent these underperformers from fragmenting the business culture?

Increase the risk for a better return

First and foremost, accept that higher risk means higher investment, thus the greater likelihood of a tangible return on that investment. This is a formula known to the business landscape’s largest, most complex programmes and any company strategically scaling to thrive; the same principle applies to businesses competing and surviving by ensuring their approach to recruitment is both smart and forward-thinking.

In other words, it pays to invest time and budget into hiring practices – shortcuts lead only to failure and end up more costly in the long run.

Prevention really is better than cure

Just as it is a mandate to invest sensibly in a recruitment strategy, it is just as – if not more – vital to implement and drive sound induction and onboarding processes in order to set employees up for success.

According to Harvard Business Review, “the first three to six months —­­ when new hires are particularly susceptible to turnover —­­ are most critical” in terms of making a long-lasting impression and ensuring staff feel supported and equipped. Having a relevant and considered onboarding system in place, as well as assigned and trusted people to help deliver it, is absolutely paramount.

Staff longevity can be a hindrance

Contrary to historical belief, having an employee stay with an organisation for an exceedingly long time can be a recipe for poor performance. Unless a long-term employee has propelled, up-skilled, and taken on different opportunities or projects within the business, the risk of complacency and a loss of motivation is commonplace.

That’s not to undermine the value of dedicated employees, rather, it is important to hold them accountable as high performers, encouraging them to progress should they wish to, and ensuring they lead the way in warmly welcoming newcomers who are likely to bring fresh, innovative ideas into the business.

Have you got questions about this article or about staffing needs? Phone us at Blaze Staffing Solutions on 1300 008 005 to speak with one of our recruitment specialists or email us at info@blazestaffing.com.au