It costs an average of 2.5 times an individual’s salary to replace an employee who doesn’t work out, including recruitment, training, termination costs, and lost productivity.
Lower employee morale and decreased productivity are the biggest consequences of bad selection and promotion decisions, according to a survey by Right Management, the world’s largest career transition and organizational consulting firm.
Other negative consequences of bad selections and promotions include: lost customers and market share, and higher training, recruitment, and severance costs, according to the survey of 444 organizations throughout North America.
It costs an average of 2.5 times an individual’s salary to replace an employee who doesn’t work out, including recruitment, training, and severance costs, and lost productivity, according to the survey. More than 4 out of 10 organizations (42%) said it costs at least three times the employee’s salary.
“Due to the rising cost of, and negative organisational impact from, bad selection and promotion decisions, more workplaces are turning to formal assessment processes,” said Rick Smith, Right Management Senior Vice President and Leader of the Global Practice that includes Assessment. “These include online assessment centres that use multiple assessment tools, including workplace simulations, situational judgment, cognitive ability testing, and other approaches.”
“Formal assessment methods provide a broader picture of candidates under consideration, more consistency in management development, and people who are the best fit for the challenges of today and tomorrow,” added Smith. “Online assessment centres enable assessments to take place anywhere, anytime, in a less intimidating environment for candidates, and enhance the speed, reliability, and quality of results.”
According to the results of the survey, the biggest consequences of bad selection and promotion decisions are:
- Lower employee morale (68%)
- Decreased employee productivity (66%)
- Lost customers/market share (54%)
- Higher training costs (51%)
- Higher recruitment costs (44%
- Higher severance costs (40%)
To replace an employee who doesn’t work out, it costs in recruitment, training, severance, and lost productivity:
- Two times the employee’s annual salary (42%)
- Three times the employee’s annual salary (26%)
- Five times the employee’s annual salary (11%)
- Equal to the employee’s annual salary (15%)
- Four times the employee’s annual salary (6%)
“There is a smaller margin for error today in selection and promoting people into key positions, and a greater need to target development efforts to ensure that they really make a difference,” said Smith.
“A bad senior-level selection or promotion can severely damage a company”s external brand, affecting customer trust and loyalty, and resulting in lost commercial opportunity. Similarly, erosion of shareholder and investor confidence in leadership can result in declining stock values. The higher the position, typically the more costly the selection or succession mistake,” added Smith.
Lower employee morale and decreased productivity are the biggest consequences of bad selection and promotion decisions, according to a survey by Right Management, the world’s largest career transition and organizational consulting firm.
Other negative consequences of bad selections and promotions include: lost customers and market share, and higher training, recruitment, and severance costs, according to the survey of 444 organizations throughout North America.
