Hiring has always been a sore point for the IT industry, and the practices are often controversial, especially when companies tend to overhire on one hand and fire or underpay existing employees. Mostly, companies focus on short-term financial gains through these practices, but they are detrimental to employee morale, which results in lesser productivity and work quality. Here’s a deep dive into why this is such a big problem and how it affects everyone involved.
The Over-Hiring Addiction
Over-hiring mostly happens in waves, when companies hire more employees than they genuinely need. This is mostly based on projections and market trends or in anticipation of big potential projects coming their way. At the surface, it may sound strategically correct but it results in several unwarranted issues:
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Resource Wastage: When more people are assigned than the work requires, managers waste time and effort handling them. They unnecessarily split or redirect critical resources like infrastructure, support, and training.
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Bench Dilemma: Overhiring leads to many employees being on the bench without work. After a certain time, companies clear the bench by laying off the extra headcounts. Being on the bench and without work creates anxiety among the employees and creates job insecurity.
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Reduced Accountability & Increased Anxiety: When too many people work on a project, accountability becomes diluted. Tasks that should have clear ownership often fall through the cracks. The existing employees become anxious about them being replaced.
The Underpayment Dilemma
Underpaying existing employees and hiring high-cost employees with the same skill set is another well-known issue in the IT industry. This could satisfy the current demand of the companies but has severe repercussions:
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Employee Motivation Slides: When the employee sees a new colleague with the same experience and skill set getting better pay, it makes them feel undervalued. Their motivation to work better goes down.
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High Attrition Rates: Employees with high skills won’t stick around where their skills and contributions are not adequately rewarded. This turnover results in increased costs in hiring, training, and making new employees productive. These additional costs are often not recognized by companies.
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Company Reputation Take a Hit: Employees leaving the company often leave their experiences on digital platforms like Glassdoor, and LinkedIn and mention it in their circles and groups. This can badly impact the company’s reputation and keep the top talent away.
The Combined Impact
Both these are serious issues for any company that wants to produce world-class products through top talent in the market. The overall impact is:
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Disengaged Employees: If employees are not provided good work or they feel underpaid then they lose interest in the work and the company. Their focus gets diverted and they look for opportunities to move out. This disengagement can quickly spread to other employees too.
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Lack of Initiatives & Innovation: A demotivated and frustrated employee seldom takes initiative or contributes beyond his work area. This can stifle innovation and growth within the company.
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Increased Operational Costs: Companies must compensate for the cost savings in salaries by investing additional efforts in addressing poor quality and rework. Even replacing the low-performing employees most of the times result in costly replacement. At the end of the day, companies are often hurting themselves by following such practices.
What Companies Can Do Differently?
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Planned Hiring: Companies should focus on planned hiring rather than doing it abruptly or solely on market trends. The plans should align with business goals and not on speculative growth.
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Offer Competitive Salaries: Salaries offered should be competitive in the market and should be commensurate to the value the employee brings in. Companies should also question what salaries are they ready to pay for a replacement if the employee leaves today.
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Offer Transparency and Solicit Ideas: Engage the employees in strategic decisions. Explain the reason and the plan if over-hiring is essential. Solicit feedback and ideas on handling the additional workload with the existing team or engaging the new hires productively.
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Prioritize Employee Well-Being: Companies can offer perks, a good support system, and well-being initiatives over and above the salaries. This makes the employees feel valued and happy and keeps their morale high.
Last Words
Over-hiring and underpaying could be a short-term solution to cost savings, but it leads to a much bigger loss in terms of talent and doesn’t even make economic sense. It’s time for companies to rethink their hiring practices and inculcate sustainable growth, competitive compensation, and employee satisfaction. Ultimately, good talent and a motivated and engaged team can only provide a competitive advantage to companies.